No one can predict when prices will rise. The Executive had promised that the CPI would not exceed 9.8% in March, and it was. They were right in April and May, but June has seen the situation spiral out of control. The CPI exceeded two digits for the first time in 40 years. This is more than the number (10.2% according to data from the INE on Wednesday). It is alarming how far we can go.
The greengrocer has more to offer than just a surprise in the grocery store's box. Tomatoes, tomatoes and peppers are basic items in any Spanish family's shopping basket. You have to pay between 8-10% more now than a year ago. Eggs (25%), which average more than 2 euros per dozen, are the basic products that have seen the greatest price increases.
Oil is another product that has seen a rise in prices. It now costs 3.90 euros per Liter, compared to 2.70 a year ago. The main focus of this week was the watermelon. This is a common summer fruit that the Spanish have to pay more than 5 euros per kilo, after it became more than 20% more costly.
Many Spanish families were left in very difficult circumstances by the pandemic, and are now feeling completely overwhelmed by the economic environment. Kantar, a consulting firm, has reported that 4 percent of households cannot afford to buy even the most basic food items in their shopping basket. This is compared to the 4% who could not afford these foods before the pandemic. Consumption is not limited to food. 14% of households cannot afford their household bills and 14% are not willing to buy a cup of coffee at a cafe. 9% eat in restaurants.
These statistics are quite telling when it comes down to large expenses like replacing an appliance (27%), changing a mobile phone (29%), or buying a car. 55% of Spaniards say that they can't afford this purchase right now as they have already spent most of their resources on the basics.
More is left in the houses than is brought in. Statistics for the first quarter show that although final consumption expenditure increased by 14%, savings rates fell to -0.8%. Seasonal effects are eliminated. .
What is the cause of this soaring price? Although the conflict in Ukraine is the main reason, there was an upward trend before the conflict. This was due to the 'boom in demand' after the pandemic.
Experts have concluded that Ukraine's lack of grain is causing a collapse in the food market. Due to the fall in imports, all products made from cereal (flour and pastries, bread, and pizza ...)) have seen their prices rise. Juan Carlos Higueras, an expert professor on the agrifood sector at EAE Business School, said that they will continue to do this in the next months.
Farmers must also accept an increase in fuel and fertilizer costs that will drive up the price of fruits and vegetables.
On the other hand, farmers are facing rising costs due to increased prices for animal feed (cereal derivatives). Some are even considering closing down their business.
Higueras says that livestock farmers are paying much higher feed prices for their animals which leads to increased meat prices. He also predicts that there will be an increase in the price of chicken meat in supermarkets after summer because these animals eat a lot cereal. Higueras claims that this will reduce production and push up prices.
The evolution of agricultural food since 2021 can be seen. An Allianz report estimates that there was already an increase of 31%. This is despite the fact that the war has escalated. It predicts that it will rise another 23% by 2022 because of the increase in inputs (fuel, electricity and fertilizers ).
The firm estimates that the retail price of food has been adjusted only by 6% despite the rise in food prices. This means that the consumer has not received even half the increase in producer prices.
The solution to growing more is not so simple. It is not easy. It's not easy. Our country produces 25.4 million tonnes of grain annually, while the Spanish consume 36. This makes us a net exporter.
Brussels has now opened its arms to allow the cultivation of the land it had to leave fallow. However, the area is only 600,000 hectares and it is not known if farmers will be willing to work because of the rising production costs. "Cultivating the fallow means that you rotate the land more which reduces its potential for new crops. Professor at EAE Business School says that you need to use more fertilizers, and it won't likely be profitable at current market prices.
The PAC agreed to temporarily relax phytosanitary requirements (insecticides), for cereal imports from countries that were previously more closely monitored, like Argentina and Brazil. This will help to "cushion" the effects of the shortage of Ukrainian grain but it will not fully cover the fall. To that must be added the import costs from other parts of the world with cargo ships crossing the Atlantic.
When Putin was unaware that the invasion would occur a few months later in 2021, Spain imported cereals mostly from France, Ukraine, and Brazil with a total purchase volume of 3,343 millions euros. The conflict broke out and changed everything.
Our country was the main supplier to Ukraine of cereal in January and February (222.5 million and 198 millions euros, respectively), nearly doubling our purchases from France. However, March saw a downward trend that left April with just 5 million euros worth of Ukrainian grain imports. Antonio Bonet, president of Exporters Club, says that Ukraine has been, along with France, the main supplier for this product to Spain since the dawn of the 21st Century. He alternates between the first and the second position.