Why food prices could be set to rise

Why food prices could be set to rise
Image source: Getty Images

Figures from the United Nations (UN) show that global food prices are rising. The news comes alongside a warning from the British Retail Consortium (BRC) that UK consumers could face higher shopping bills. Here’s why it’s happening and what you can do about it.

How much are food prices rising by?

The UN’s Food and Agriculture Organisation (FAO) measures changes in global prices of food commodities. The FAO’s food price index (FFPI) tracks five essential raw ingredients that can help us predict what might happen to our average basket spend. 

Overall prices rose by 4.8% in May compared to April, which is a year on year increase of 39.7%. It’s also the biggest monthly increase since October 2010.

This latest rise is the 12th rise in a row and reflects increases in all key food groups including cereal, dairy and sugar. 

The greatest percentage increase was in vegetable oil, which saw a month on month uplift of 7.8%. 

Why are food prices rising?

Food prices are rising for a number of reasons. Prices have been affected by lower production and increased demand. Also, the yields of some ingredients have fallen due to poorer growing conditions. 

One major complication is the shipping industry, which has been hit hard by the pandemic. The cost of oil has risen from $35 (£25) per barrel to over $55 (£39).

Adding to the problem is the current scarcity of shipping containers. In fact, one UK trade association said that shipping costs had increased by up to 300% since the beginning of 2020. 

Creating another set of problems is Brexit. The fact that the UK is now considered a third party and is not part of the EU trading club simply fuels border complications. In some instances, original contracts have been rejected and firms forced to pay more to transport their goods.  

With the world still battling the effects of the pandemic, it’s unlikely that these logistical issues will be resolved any time soon.

When can we expect higher food prices?

It’ll take a while for the effects of shipping and rising food commodities to come through. But the BRC estimates we can expect to see prices rising from autumn. 

The BRC also points out that the current fall in shop prices has already started to slow. In April, average prices fell by 1.3% year on year. This was below the average decrease from 12 and six months ago.

In May, the decline in store prices slowed even further, falling to just 0.6% year on year. 

For some sectors, such as furniture and electricals, prices are already on the rise. 

4 iron-clad rules for saving money on everything

Our Editor Sam Robson has been on a personal cost-cutting mission for years – and it’s time to share his wisdom.

Check out his choicest saving tips and tricks in this free report, “Sam’s 4 Iron-Clad Rules For Saving Money On Everything”.

Just enter your email below for instant access to your free copy.

By checking this box and submitting your email address, you agree to MyWalletHero sending you emails with money tips, along with details of products and services that we think might interest you. You can unsubscribe from future emails at any time. You also consent to us processing your personal data in line with our privacy policy, and our cookie statement. For more information, including how we collect, store, and handle personal data, please read our Privacy Statement and Terms & Conditions.

How to tackle rising prices

Higher shipping costs and rising food prices will need to be covered. Ultimately, that burden is likely to fall on consumers. 

If or when that happens, the practical solution is to budget. To help you make your money go further as lockdown eases, take a look at our three tips to budget effectively and these breakthrough money management apps

And if you like to err on the side of caution, you can read more about how to prepare for a financial emergency

Reviewed and rated 4 stars out of 5 by MyWalletHero

Need a financial adviser? Get a free initial review lasting up to 1 hour, plus £50 off any follow-up advice.

MyWalletHero has sourced you a £50 discount off the cost of advice when you find an independent or whole-of-market financial adviser through Unbiased.co.uk*. All advisers are FCA-regulated, qualified and give fully unbiased advice. To find yourself an adviser fast and for free – use the Unbiased matching tool.

*This is an offer from one of our affiliate partners. For more information on why and how we work with partners, click here.

Was this article helpful?

Some offers on MyWalletHero are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.