Agronometrics in Charts: Inflation and its effects on prices and consumer trends
In this installment of the ‘Agronometrics In Charts’ series, Valeria Concha studies some effects of inflation on prices and consumer trends. Each week the series looks at a different horticultural commodity, focusing on a specific origin or topic visualizing the market factors that are driving change.
Inflation is the sustained and generalized increase in the prices of goods and services in an economy, over time. Inflation is said to exist when the value of money depreciates and therefore the number of goods that we can buy with a sum of money becomes smaller over time. In recent years, global inflation has been rampant, partly due to the Covid-19 pandemic and the changes in economies and habits that it brought with it.
The war between Russia and Ukraine has been another contributing factor. However, an article in the newspaper, El Economista discusses factors that have also caused an increase in prices. It reviews broker margins, noting that it is essential to review the entire marketing chain to identify areas where costs can be more efficient and thus offer food at affordable prices.
Juan Carlos Anaya, general director of the Agricultural Markets Consulting Group (GCMA), explained that there are opportunities throughout the production and marketing chain and therefore all sectors can support the great effort on reducing the impact of inflation.
Although the margins are considered normal to a certain extent, and the behavior is similar in other countries, it is the primary productive sector that has been hit the hardest by inflation “due to the rise in prices of fertilizers, grains, raw materials and supplies, logistics costs, production seasonality and security expenses, for which the producers of this country have found themselves in a very complex situation," said Juan Cortina Gallardo, president of the National Agricultural Council (CNA).
He also explained that "the concern we have is that it seems that the primary sector is raising prices, but this is not necessarily the case, on the contrary, we are the sector most affected by what has happened and we are making a very important effort and everyone has to do their part, not just us”.
Rebeca Grynspan, Secretary General of the United Nations Conference on Trade and Development (UNCTAD) said in Geneva "If we are not able to lower fertilizer prices, the affordability crisis we have today will be an availability crisis tomorrow, and we're working on that right now."
Among the products viewed in the article, avocados presented a marketing margin of 182% between the producer price and the final price that the consumer pays. According to a recent update by the National Institute of Statistics, Geography and Informatics (INEGI), consumers in Mexico paid an average of $4.30 per kilo of Hass avocado during the month of August, 16% more than during the same month in 2021. As of August of this year, inflation in Mexico rose to an average of 8.7%.
In the United States, according to the latest report by the Rabobank North American Agribusiness Review, in relation to retail consumption, they conclude that American consumers are changing their purchasing decisions for basic foods due to high prices. They also found that the high level of inflation is the result of months of rising costs for consumer goods companies, which have gradually passed on rising costs to retailers.
According to the August IRI survey of primary grocery shoppers, the price per unit across all foods and beverages measured by IRI surged 14.3% in the four weeks ending August 28th, 2022 versus a year ago. This is up from 13.3% in July. August inflation was +16.6% in the center of the store (grocery) and +13.3% for perishables. Compared to August 2019, prices across all foods and beverages were up 27.4%.
“Inflation has been accelerating since early fall 2021, drought conditions are severe, consumer confidence is low and grocery patterns are switching very rapidly," says Joe Watson, VP, Retail, Foodservice & Wholesale for IFPA.
Similarly, Gabriel Noboa, a member of the commercial board of the Peruvian Association of Table Grape Producers (PROVID) and commercial manager of Agricola Don Ricardo, tells Fresh Fruit Portal that there is a lot of nervousness over demand from consumers and supermarket chains being affected. He warns that "there is a potential risk that grapes could be replaced by cheaper products such as bananas. If consumption of regular table grapes changes, purchase volumes will drop”.
When analyzing the prices of the 21 commodities managed by Agronometrics in the US Market, it is possible to see that on average, the prices during the year 2022 have been higher than those recorded in the last 4 years, with the greatest increase in the months of May, June and July. Compared to 2021, prices on average have been between 2% and 14% higher.
(Source: USDA Market News via Agronometrics. Agronometrics users can view this chart with live updates here)
In our ‘In Charts’ series, we work to tell some of the stories that are moving the industry. Feel free to take a look at the other articles by clicking here.
All pricing for domestic US produce represents the spot market at Shipping Point (i.e. packing house/climate controlled warehouse, etc.). For imported fruit, the pricing data represents the spot market at Port of Entry.
You can keep track of the markets daily through Agronometrics, a data visualization tool built to help the industry make sense of the huge amounts of data that professionals need to access to make informed decisions. If you found the information and the charts from this article useful, feel free to visit us at www.agronometrics.com where you can easily access these same graphs, or explore the other 21 commodities we currently track.