Rapid food price advance persists
While inflation has slowed on the whole, food prices are still soaring to suggest central banks' struggle against inflation is not bearing fruit in an important area.
Compared to December of 2021, the consumer price index was up 19.2 percent, while food prices had grown by 35 percent by the end of February.
"If we compare the February result to August 2022, the index – including food and non-alcoholic beverages – was up 1.3 percent," said Viktoria Trasanov, leading analyst at Statistics Estonia, adding that food prices grew by 11.1 percent during the same period.
Therefore, falling energy prices and higher base interest rates have not managed to slow rapid food price advance. The trend is the same in most European countries.
Andres Oopkaup, chairman of the council of the KEVILI farmers cooperative, said that farmers bought fertilizer at up to quadruple prices for this season. These expenses need to be covered.
"It is impossible for cheaper fuel or energy to be reflected in retail prices. These processes take time for farmers, up to a year in some cases."
But not all input prices will fall back to previous levels. Salaries have gone up and cannot be lowered, Oopkaup said. Fertilizer might never go for €200 per ton again, like it did in the spring of 2021.
"That would require long periods of very low natural gas prices. I believe those times will not return," Oopkaup said.
Food prices and wages are locked in a vicious circle of consumption, Oopkaup remarked.
"If we hike food prices and then hike salaries right after, what we achieve is we lower the value of money. We get inflation. Brakes need to be applied somehow, whether from stabilization of food prices or salary advance slowing down, with the latter the less popular option."
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Editor: Marcus Turovski