Agriculture specialist comments on rising food inflation.
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agriculture partner at Pagan Osborne and accredited agricultural law specialist, said:
“The BRC – Nielson Shop Price Index June 2011 shows food inflation increased to 5.7% in June, up from 4.9% in May. This will not be welcomed by consumers who are having to tighten their belts as the economy is still at a low ebb, job security remains fragile and pay increases, if any, are much lower than food inflation.
“Consumers may think farmers are in a different boat from them as they are being paid more for their produce. That is not always the case. While the price of wheat for example has increased, it only forms a very small part of the cost of a loaf of bread although often used by bakers as an excuse to increase prices but not to decrease them when prices fall. The cost of packaging, transport and fuel will have a much greater impact on the price of bread than the wheat price.
“Dairy farmers continue to be paid rock bottom prices, very often below the cost of production, and many are still leaving the industry as they cannot make ends meet.
“Very little of the increase in food prices makes its way into farmers’ pockets. The vast majority stays with the middle man or retailer.
“Farmers are in turn hit by increases in prices of their inputs for example fuel and fertiliser whose increase in price always seems to follow very closely behind any increase in commodity prices but again don’t seem to fall when commodity prices decrease.
“Farmers are therefore not reaping the benefits which the headline food inflation figures might imply and are in fact in the same boat as consumers.”