This is the simplest food item: sliced ​​white bread. In the UK, the average price in April was 28% higher than a year earlier, at £1.39, €1.60 or $1.72.

IN Italy, prices for spaghetti and other pastas, which form the basis of the Italian diet, rose by almost 17% compared to the previous year. In Germany, the European Union’s largest economy, cheese prices are almost 40% higher than a year ago, and potatoes are now 14% more expensive.

Generally European Union food prices in April 2023 were on average 17% higher than in April 2022. The situation in Britain is worse than in its Western European neighbors: food and soft drink prices were 19% higher in April than a year earlier – the highest rate of annual inflation in more than 45 years. For comparison, analogue inflation in the USA – 7.7%.

Persistent inflation is squeezing low-income households and worries European politicians. (In Italy, the government held a meeting this month to discuss rising pasta prices.)

At the same time, the main costs of food production, including wheat and other agricultural products, as well as fuel, fell in international markets – which raises questions about why food prices remain so high for consumers in Europe.

What causes food prices to rise?

The price tag for a loaf of bread includes, among other things, the costs of packaging, transportation, and wages.

The United Nations Global Price Index for staple foods such as wheat and meat peaked in March 2022, shortly after Russia invaded Ukraine, one of the world’s largest grain producers. The war disrupted grain and oil production in the region and exacerbated the food crisis in parts of East Africa and the Middle East.

In addition to commodity prices, Europe has seen rising costs across the entire food supply chain. Energy prices soared as the war forced Europe to quickly replace Russian gas with new supplies, pushing up the cost of producing, transporting and storing food.

Although wholesale energy prices have fallen recently, retailers warn that it will be a long time – perhaps up to a year – before consumers see the benefits.

At the same time, vacancies are forcing employers and food companies to raise wages to attract workers. This, in turn, increases the costs of enterprises, including the food industry.

Guilty of speculation?

Some consumers, unions, and experts speculate that inflation is being kept high by companies raising prices above cost to maintain profit margins.

Economists at Allianz, a German insurance company and management company, estimate that between 10% and 20% of food inflation in Europe can be attributed to speculation. “There is a part of inflation that is not easy to explain,” said Ludovic Subran, chief economist at Allianz.

On the other hand, retailers are pointing to large manufacturers that had double-digit profit margins. In April, Swiss giant Nestlé said it expects margins this year to be the same as last year, at 17%.

Even taking into account costs such as transportation and factoring in farm-to-shelf pricing delays, the Allianz economist said he expected food inflation to ease by now.

In the UK, some economists are looking elsewhere. Michael Saunders, an economist at Oxford Economics, said in a May note to clients that inflation due to greed is not to blame. Rising inflation reflects the cost of energy and other basic commodities, he said.

Have food prices peaked?

Food prices in general are unlikely to fall anytime soon. Instead, policymakers are keeping a close eye on the possibility of a slowdown in growth. There are signs that the inflation rate has reached its peak. In April, the rate in the European Union fell for the first time in two years.

“It looks like food prices have been falling longer than we expected,” the Bank of England governor said this month.

Across the continent, governments are intervening by imposing price ceilings on basic foodstuffs. In France, the government is promoting an “anti-inflationary quarter” by urging retailers to cut prices on certain items until June. Meanwhile, Finance Minister Bruno Le Maire said this month that food manufacturers should do more to contribute to the effort, warning they could face tax penalties if consumer fraud is found.

These efforts may help some buyers, but in general there is little comfort for Europeans. Food prices are unlikely to fall, the only thing that could happen is that the rate of growth will slow down at the end of this year.