Stress is growing within the production chain due to rising prices

Price increase of food narrows margins and increases stress in the entire production chain (agriculture, industry and distribution), tensions that citizens will notice when purchasing, at least until spring, indicated Mercedes Salas from Efeagro.

Price data at the end of 2021 shows that global crisis due to rising prices of raw materials and transport is already reflected in the bill in a supermarket or a traditional store, although the food sector has its own peculiarities when reacting to inflation.

“Prices food and soft drinks They rose by 5 percent in December compared to the same month in 2020, while Spain’s general inflation rate was 6.5 percent, the highest since May 1992, according to the National Institute of Statistics, Salas commented.

Logistics, plastic and rising prices

Director of Customer Service for Iberia Kantar World Panel, Carlos Cotos, emphasized that although the energy recovery affected the rise in food prices, it was not the only factor. The costs of plastic, packaging or transport and logistics had a greater impact.

According to Cotos, “the whole food chain under stress and operating with small margins. The farmer has difficulty increasing compensation in very “exposed” markets, the producer increases costs and loses margin when passing them on to distribution, which in turn tries to contain prices or react to this phenomenon with promotions.

“The bad news is that we expect inflation to last about three months, but on the other hand, we should see it moderate after that, as costs return to some normality.” Regarding the impact on consumption, he pointed out that when it comes to food, the citizen decides how he wants to absorb it, either by changing his diet or by choosing meat or fish or others depending on the price, he emphasized.

Uncertainty in the supply of raw materials

According to María Jesús Fernández, senior economist at Funcas, there is a “second stage” of the inflationary process through which production costs are transferred from businesses to consumption, and this is especially visible in food.

Prices from raw materials They are the most expensive in the “century”, since 2000, in a supply situation that can be compared to that of the 70s due to the oil crisis, explained Mercedes Salas from Efeagro.

Given this situation, he assured that the margin of error of any forecast is high, due to uncertainty about the duration and scope increase in food prices; Furthermore, the circumstances affecting inflation are significantly different from those that existed before globalization or the arrival of the euro, concludes Salas.

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