Food prices have been rising for a lengthy period of time and look set to continue to do so, with producers announcing widespread price hikes, most notably for eggs, dairy products, coffee, chocolate, as well as meat and fish.

The central bank says the biggest driver of inflation in this sector is the rising cost of input raw materials; the bank estimates that food price inflation this year will exceed general inflation.

Bank of Estonia economist Kaspar Oja said: "The Bank of Estonia forecast indicates that prices will rise by around 6 percent this year, while food prices indeed are expected to rise even more than that. In our current forecast, this is about 7 percent."

"We've been seeing that food raw materials mostly rose at the end of last year, but now they've stabilized somewhat. However, it will take a bit of time for this to be reflected in consumer prices," Oja added.

The peak in food prices will be seen in the third quarter of this year, Oja continued; this will follow the VAT hike which takes effect on July 1.

Since the beginning of the year, supermarket Maxima has been getting price hike notices from dozens of suppliers.

Kadi Lainelo, chief buyer at Maxima, said: "The price rises vary greatly — from one percent to 48 percent — and this depends on the product group. To highlight a few: Coffee and cocoa products — and all chocolate products are related to cocoa beans — as well as dairy, where raw material prices are the reason. There are also other factors which are affecting egg prices, including foot-and-mouth disease and avian flu."

The price rises will continue in the future, Lainelo forecast, with coffee and cocoa still seeing the highest increases.

Competitor Rimi is also receiving constant notifications from producers wanting to raise prices. Consumers, however, have adapted to this, the supermarket says, and are making more deliberate choices to avoid the rising costs. This in turn puts retailers under pressure.

Marilin Jürisson, buyer at Rimi Eesti, said: "All of the lowest cost items — the cheapest sausages, milk, apples — are sold below cost, meaning everyone is working very hard to attract the customer."

Jürisson noted that the future depends heavily on global market developments, while some product prices may actually fall.

"Right now, we're really hoping to be getting news that olive oil prices might drop in the spring; similarly, there's great anticipation for orange juice prices to fall," she went on.

The price of beef has been rising for producers for around six months now.

One producer, Linnamäe lihatööstus, sources its raw materials from Estonian cattle farmers, and says prices have increased by 40 percent over the year.
Linnamäe lihatööstus CEO Marko Hiiemäe said: "In just a couple of months, the spike has been very sharp, with price hikes happening almost weekly. This has now created a situation where we, too, must raise prices for consumers," he said.

Foot-and-mouth disease, higher demand, and a shortage of heads of cattle are all factors in the rising prices, Hiiemäe added.

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