A hoped-for fall in food prices has not eventuated, with the May Food Price Index rising 12.1% annually.
Statistics NZ said grocery food prices increased by 12.7% in May compared to the same month in 2022, while fruit and vegetable prices increased by 18.4% for the same period.
The increase in fruit and vegetable prices was driven by avocados, kūmara, potatoes, and tomatoes, and grocery food prices were pushed up by rising prices of fresh eggs, potato chips and lollies, the stats organisation said.
Meat, poultry, and fish prices increased by 11.7%.
Horticulture New Zealand Communications Manager Andrew Bristol said the fine print was that fruit and vegetable prices fell 2.9% between April and May. He said the industry faced ongoing challenging growing conditions.
United Fresh produce group General Manager Jerry Prendergast said the price of vegetables had dropped back in May, with significant increases in costs for the key vegetables singled out by Stats NZ.
He said prices for avocados, potatoes, tomatoes and kūmara "would not back off". Tomatoes had been severely impacted by disease and wouldn't come back in price until spring and kūmara prices wouldn't get any better until the new crop in February, he said.
Prendergast said there would be a good crop of leafy greens coming as growers had been able to plant in May, with some warm clear days.
He said there was cheap fruit available for consumers, with good deals on mandarins, apples and kiwifruit. Other vegetables such as broccolli would have periods of cheap buying.
"Don't go heart set [to the supermarket] with your shopping plan. When you go in, look for great value, and turn it into an opportunity."
The growing industry received a boost on Wednesday, as Prime Minister Chris Hipkins ruled out a new fertiliser tax.
A tax had been worrying farmers and growers, also facing a new emissions scheme.
Prendergast said the announcement by the prime minister "would take a little bit of pressure off".
From April to May, food prices rose 0.3% compared with April 2023. After adjusting for seasonal effects, they were up 0.5%.
In April food price inflation rose to its highest level in more than 35 years. The 12.5% food price inflation in the year to April 2023 was the highest level since September 1987.
Compared with April 2022, grocery food prices increased by 14.0% and fruit and vegetables prices increased by 22.5%.
Slowing down?
Food and Grocery Council Chief Executive Raewyn Bleakley said the continuing rise in food prices remained a concern, though there were indications the rate of increase was slowing.
“The cost of living crisis makes a competitive environment for suppliers even tighter, and suppliers are absorbing costs to stay affordable to consumers. Fresh produce remains a concern, though that is mainly a result of the slow growing season coming hard on the heels of the bad weather events and a very wet autumn.”
She noted new research which showed price inflation was not caused by profits, but rather by input prices such as ingredients, fuel, and the cost of doing business.
“It’s clear that once those factors are brought under control – and some of it is imported – we are likely to see a general easing in food price rises in line with the overall inflation rate."
The latest Infometrics-Foodstuffs New Zealand Grocery Supplier Cost Index reported an 8.8% annual increase in what suppliers charged supermarkets for goods in May.
The index measures the change in the cost of 60,000 grocery goods charged by suppliers to the Foodstuffs North Island and South Island cooperatives.
Foodstuffs NZ Managing Director Chris Quin said global indicators pointed to some of the main drivers of food price inflation peaking. He said international cost pressures were seeing an overall downward trend, but New Zealand wages and weather were still fuelling cost increases.
“This could see the cost of imported goods start to moderate ahead of a slowdown in cost increases on domestically produced grocery items.”
He said customers were cutting back on fresh fruit, veggies and meat, and shopping around to get the best deals.
The Government has introduced new legislation aimed at improving competition in the supermarket industry, including forcing the duopoly of Foodstuffs and Woolworths/Countdown to open up their wholesale networks, with a threat that wholesale prices may be set by a regulator if they don't play ball.
The appointment of a grocery commissioner to oversee competition in the industry, similar to the telecommunications commissioner, is expected soon.
Global concern
Earlier this month the United Nation's food agency published its food price index which showed a fall in prices for staples such as vegetable oils, cereals and dairy which pushed it to its lowest level in two years. The cost of meat, sugar and rice rose.
The index rose in April for first time in a year, with higher prices for sugar, meat and rice, and reached an all-time high in March 2022 after Russia invaded grain-exporter Ukraine.
The price of sugar has been rising for months, and increased 5.5% from April to May.
The Food and Agriculture Organisation (FAO) said international prices of rice continued increasing in May, "sustained by Asian purchases and tighter supplies in some exporting countries, such as Viet Nam and Pakistan".
The agency said its Cereal Price Index declined 4.8% in May from the previous month, led by a 9.8% drop in world maize quotations, "due to a favourable production outlook along a sluggish import demand".
World wheat prices declined by 3.5%, which it said reflected "ample" supplies and the extension of the Black Sea Grain Initiative which allowed Ukrainian grain out of the war-stricken nation.
In the European Union consumer food prices were on average almost 17% higher in April than a year earlier.
Governments in France, the United Kingdom and Hungary have taken action to halt the rise in food prices, with caps on the price of staple foods and France recently announcing a deal with food producers to cut prices on hundreds of items by up to 10% in July.
New Zealand is not considering similar plans, Commerce Minister Duncan Webb said.
37 Comments
Remember, it's not greedflation and the supermarkets don't need any more competition. Let the tax payer pay foodstuffs.
Might sound like a broken record here but when your economy is not focused on credit creation for productive purposes (and that can include creation of value propositions in the grocery space - most of the developed world has a strong and growing discounter channel) and when your govt has no price control policy, what do you expect?
The government hasn't helped, likely made things worse.
Speaking of unproductive, central government (excluding frontline workers in schools and hospitals) has been the second-fastest growing employer in the NZ economy since 2017, behind residential construction. This comes despite the consulting/contracting costs to the taxpayer have gone through the roof.
Keep jacking up aggregate demand without opening up supply, and this is what you get.
Wow. Looking at both the trends for the UK and US on Truflation, prices for food & bev seem to be tempering and heading down.
Purely from my own anecdotal observation, I'm really feeling the price rises at the supermarket more than ever. Almost impossible to buy what we use each week and keep the shop below $200, whereas not that long ago (it feels like) $150 would have been the absolute upper limit - this is shopping for two adults and a two year old.
Not a world-ender for us, as we are fortunate enough to be in a decent financial position. However, it is expensive enough that we have swapped out one takeaway/meal out per week to a home cooked dinner, and we are doing typically three different meals over two nights each (in the past we might have been happy to buy ingredients for just one meal). I am also venturing into the local Indian, Asian supermarkets and fruit and veg shops to find further savings. As consumers we need to do a better job of shopping around to force a more competitive environment.
One other thing I've noticed is the quality of a lot of fresh supermarket food is declining. We made the mistake of doing Countdown Online shopping last week, and the meat was such poor quality that we rejected it for a refund ('prime' mince was so fatty the dog didn't even want it, and I'm not kidding). All fruit and veg were sub-standard at high prices as well.
I feel for those on lower incomes or with very tight household budgets ... it's one thing when your higher grocery prices mean forgoing a weekly Thai takeaway or choosing Dominos over Hell Pizza to counteract the cost of the big shop; it's another thing altogether if you simply can't afford the price rises.
I am also venturing into the local Indian, Asian supermarkets and fruit and veg shops to find further savings. As consumers we need to do a better job of shopping around to force a more competitive environment.
Good call, I've been hitting the Asian and Indian supermarkets for years as they have much better prices for staples like rice, and have a far superior, bulk, and cheaper range of spices such as bulk cumin seed, garlic powder, paprika compared to the priced 50g boxes in supermarkets. Also Asian cooking is relatively cheap to do in bulk, such as bulk curries that last a few days etc and use such wonderful flavours for the cost.
Now dominos $5 pizza is gone the way of $$6.90, they held out so long and finally caved.
Countdown Online? Seriously? That's daft. And Countdown? Daft too.
My anecdotal observation is quite different. Ours hasn't changed much since January. If anything it has fallen in the last few months.
But we're very active shoppers. (I enjoy shopping for food and hate all other types of shopping with a passion!) We look for substitution products. Home brands. Shop between our local Chinese supermarket and Pak'n'Save. Buy in bulk when prices are good and have a large freezer. The only time I head to Countdown is Tuesday / Wednesday mornings to fight with the little old ladies over marked-down-to-sell meat which is often better than the other supermarket's specials, i.e. < $10 / Kg.
We don't buy much processed food or sugar drinks. Know what's happened to sugar prices recently?
https://tradingeconomics.com/commodity/sugar (Choose the 5 year graph.)
It was appalling. Weirdest consistency to it, like my big metal BBQ spatula couldn't even cut through the meat to get it into the fry pan (let alone the flimsy plastic spatula). Almost all fat too, I'd say 75% fat by volume of what was left over when the cooking was done. Hideous ... I used to buy that raw dog food for the pup and it looked nicer. Luckily the live chat is fairly generous at doling out refunds.
When I go shopping I have watched as the shoppers pulling together online orders just grab the first item they see. No consideration of alternatives or checking of Best before or use by dates. In comparison I will rummage at the back of the shelves to get the best dated products. I will also compare alternatives and shop to the offers, reductions and clearance items. I would estimate that my savings compared to online buyers are considerable.
Sadly those in tight situations and on low incomes, vote for idiots promising free money for everyone, not realizing that free money results in inflation that will cancel out said free money and put them into a worse situation than before.
Said free money is sucked up by inflation and flows straight to business owners and high-income earners that manage said business.
Generally, we realize our collective stupidity (usually after 9 years, but it seems this time it will be 6, but really it should have been 3) and vote the free money merchants out of office.
The new administration will stabilize the situation and everything will be fine for a while, however, after 9 years the free money brigade will be back again promising nirvana but delivering poverty to their voters, and the cycle will repeat again.
The best approach is to be properly educated, invest wisely, and ensure that you do not become reliant on the Labour Party and the Greens giving you free money. Ensure that you are in a position to hoover up the free money as it is spent in the economy by the original recipients, which it surely will be.
What are the other options ?
How else so called 'poor' people can survive ? Rich landlords are getting richer, middle class FHB is working hard and getting squeezed out.
Only think to normalize is to tax the rich landlords . Regarding uplifting the so called freebie people, there is free education and all those support. Their attitiduecan't be changed via govt policy , I guess.
Look. It's easily fixed. Whatever Inflationary force emerges, just remove it from the CPI calculations. Strip it out; normalise it, seasonally adjust it, choose a different comparative base or plain write it off as a one-off blip, but just get rid of it.
There. All done.
Under the rug is full unfortunately, we can't sweep any more under there. It is currently cluttered with any form of accountability or transparency by the current government at large. The next government will do a spring clean and fluff the rug, and boy will they be in for a big surprise of what they find.
I agree. We've squeezed in nearly 900k people into our population over the last 15 years, most of that in the last 7 years without growing our infrastructure to keep up with the demand pressures from that population growth.
Shouldn't come as a surprise to anyone that the price of basic amenities in this country is through the roof.
In fact, non-tradables inflation averaged 2.9% in the 5 years from 2016 to 2021, before skyrocketing in 2022. Thanks to cheaper imports from overseas that the headline number stayed low all those years.
Quiz question - what is by far the biggest driver of the huge increases in the cost of producing fruit and veg in NZ? Is it wages? Nowhere near. What about fuel? Not any more. Compliance and regulation? Nope. Do you give up?
Yes, it is higher interest rates - accounting for over half of the increase in costs faced by food growers in the last 12 months.
Now convince me that hiking interest rates is the answer to higher food prices.
That's the problem we have. It's not the price of food that higher interest rates is trying to influence. They are a casualty of the driver of our 'wealth' - Debt created from the rising price of property that is used as collateral to keep the country afloat. It can't continue. But what other way is there to control the problem?
It should be by regulatory means - but that's not going to happen as the banks/politicians will fight that tooth and nail. We'll get the traditional "Ok. If that's the way you want to play it, we're leaving! We're not kidding this time. Look! HSBC has already opened the door that we will follow them through..."
Ask your self one question - "What will happen if the OCR falls in NZ?", and 'cheaper vegetables' won't be the answer that matters.
I don't agree that the prices of consumer goods and services are increasing because we have too much credit money flowing into the economy. Obviously, I completely agree that cheap credit drives asset bubbles (houses, land etc) and this can leak out into general prices.
My view is that we should control credit allocation - offering a lower credit rate for productive investments and new housing and / or using other tools to restrict the flow of credit into speculative assets (LTV, risk weighting etc).
Yes. Credit creation guidance is what we need.
Lords and bankers will say thats against free market .. are we becoming communist / socialist ...??
But if we look at last 2 decades , in NZ there was an invisible credit guidance . Create money against property as collateral .
Was interesting last week, when Luxon was asked about his 1.5 million capital appreciation against a non-productive investment in his 7 properties.
Yes, I can't help going back to the repeal of the Glass-Steagal Act in 1999. Leading to the failure of the ARM Mortgages and Collateralised Debt Obligations which were futured to death by Wall Street. Hello housing Ponzi 1.0. Thanks Bill Clinton.
As anyone Big enough, with a big enough problem, will tell you, You've gotta lie. To ourselves as well as the next biggest fool.
So since 2008, we haven't marked to market, (what market if nothing has to have an effective capital cost) using national balance sheets to QE our way out of the fibs we told ourselves.
A constant doubling down of money, until they got the inflation they wanted.
The Inflation was planned, and the normalisation of rates was always planned. Not so much the eye watering debt.
Kicked can meet cliff.
The end is nigh I tell you. Well, nearly nigh, surely?
IAG, which owns the State, AMI and NZI brands in New Zealand, posted a presentation for investors on Wednesday flagging “rising rate increases” as a result of high inflation and higher reinsurance costs. It shows the car insurance premiums it is charging to New Zealand households rising by around 20%, and house insurance rising by 20% to 30%.
The Food and Agriculture Organisation (FAO) said international prices of rice continued increasing in May, "sustained by Asian purchases and tighter supplies in some exporting countries, such as Viet Nam and Pakistan".
In the case of Vietnam, rice prices are actually falling for some varieties such as Japonica. And this is primarily higher priced. And Vietnam has robust food security policies for obvious reasons. Vietnam has also entered into an agricultural trade agreement with China.
To understand food price inflation in China, people often refer to pork prices.
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