The food products put up the price over expectations

The incomes of the European farmers are less affected then the ones of the buyers from supermarket, and the selling prices of the food are much over the ones estimated by the European Commission one year ago.

With a few exceptions, in most of the European Union states, the incomes of the farmers have increased in the period in which appeared the first signs of the cavalcade for the prices of food products. The Lithuanians farmers have earned on last year with about 40% more then in 2005, the Estonians with 22,5%, the Czechs with 20,9%, the Polish with 13,7% and the list can go one. Generally, the additional incomes have increased between 40% and 1,7%, with the exception of a few countries, among which Romania, in case in which the farmers were in lost. The Romanians and the Bulgarians have obtained the lowest incomes from the agricultural activities, their incomes being in 2007 with 6,7%, respective 8,5% lower against 2005.

In what concerns the consumers of food products, they are witnessing a reverse trend, respective their pockets grow empty while the wave of rise in price of food takes by storm the European Union. The European Commission tries to calm them down, sustaining that the prices for the agricultural products, raw material for the food ones, won’t maintain at this level for a long time. Although, they don’t specify the time when it would take place an eventually decrease of prices, but they estimate slowly increases for the pork and for milky products. The chances of materialization of these forecasts are doubtfully. A few time ago, the same European Commission estimated that the effect of the rise in price for agricultural products in the selling price for food products will be of 3% for bread and cereals, 8% for meat, and 12% for milk, cheese, eggs and 8% for sunflower oil and grease. The reality has swept away all these calculations, the rise in price being of 10% for bread and cereals, 12% for greases and sunflower oil, 15% for cheese, milk, eggs. Only the price for meat was according the prognosis, but per total food products, the aggregated increase of the prices being of 7% against 5% the estimated one.

The consumers face the food shock

The Agriculture Directorate within the European Commission appreciates that the impact of the increased prices of the agricultural products on consumers will be limited as a result of the low weight of the raw material value (cereals, meat etc) in the final price of the products (about 25% on an average), as also of the weight of the expenditures with food in the Europeans’ budgets. It’s a plausible estimation just in the situation in which the price for the fuels freezes, thing that is less probable. Moreover, recently, the Statistic Office of the European Union made public the data which prove that the European citizens give more and more money on food. On an average, about 20% of the monthly expenditures of the households are allocated for food, with 6% over the ones from 2005. However, no matter of the official estimations precision, a conclusion corresponds with the approval of the Food and Agriculture Organization (FAO) and the one of the United Nations Conference on Trade and Development (UNCTAD) : the increased prices for food aren’t a temporary phenomenon, they won’t return to the levels before the crisis, but they will maintain at the current rates at least on medium term. The evolution of the world prices for the agricultural products has a strong resonance in the consumer price index for food products. The inflation of the last one is bigger then the general inflation, with significant differences between the countries of the European Union. They are explainable by the different weight of the agricultural raw material value in the total costs for food, by the structure of the food consumption and by the level of food processing in each country. It also matters in the differentiation between the member states in what concerns the inflation of the food products and the competitive structure of the distribution chain, as also the marketing strategies from the food industry and retail. The Romanian consumers and the ones from the Baltic Countries have felt the biggest rate of inflation for the food products, between April 2007 – April 2008 this being of 17,4% in Latvia, 11,9% in Lithuania, 11,6% in Estonia and 8,7% in Romania.  A comparison with 1996, shows important rate of price increase: food– 31,1%, bread and cereals– 33,6%, meat – 25,2%, fish – 46,5%, cheese and milk– 31%, fruits – 39,7%, vegetables– 34,4%.

The standard of living is directly affected

The rise in price for the food is felt differently in the standard of living of about 70% of the households. The rest of 30% earn 50% of the total income at the level of the European Union and as a result, against these the price gallop having a null impact. Of the affected households group, for 111 million citizens the risk of poverty is maximum, they being in the category which strongly feels the price shock.  An increased vulnera-bility it is recorded among the lonely parents with children, of the unmarried persons and of the families with three or more children. As the incomes are more reduced, the expenditures are much higher, the ones with modest incomes spending on food about 60% from the monthly budget. The value of this percentage could increase in the next year with 4,5%, if the trend of prices remains similar, that will mean a decrease of the purchasing power of about 0,5%.  A more pessimistic scenery, elaborated by the European Commission, starts from the hypothesis of a double increase in prices, of 8%.  In this case, the purchasing power of the European families with medium incomes will be eroded with 0,9%.

This wave of increases in price which hit the prosperous countries of the European Union after almost three decades of price stability for the food products, privilege of which the new member states didn’t benefit, changed the perception of the Europeans about the Common Agricultural Policy. Against 2006, when a third of them considered that one of the roles that they play successfully is the one of ensuring a quality and accessible as price offer, in 2007 the weight of the optimistic persons had decreased at a fourth.

The evolution of the agricultural products prices in 2006 – 2007

•  Cereals

According to the statistics of the European Commission, in the European Union, the price for the wheat had increased starting with 2006, from 112 euro/tone, to 225 euro/tone. At world level, the price increase was from 95 euro/tone to 130 euro/tone. The corn recorded the same tendency in EU, the rise in price being from 125 euro/tone to 163 euro/tone.

•  Meat

The price for the chicken and pork at producers, on the world markets, have increased as a result of increasing the price for forages, with 9%, respective 3%. The evolution of these prices will continue to reflect in future also the one of the cereal and other forages prices.

•  Milk and other milky products.

There have been recorded increases of 30% for the milky products and 35% to the one of cheese to producers, as a result of decreasing the production on world and European level.