Inflation driven by food: Thai noodle prices inch up, pork prices propel in China & UK 40-year inflation high

17 Aug 2022 --- As data from July starts to come out, food prices climbed with consumers across countries’ paying record amounts for food even if general inflation numbers and food commodity prices are going down in most nations.

Inflation went down in the US for the first time this year (from an annualized rate of 9.1% to 8.5%); however, food prices went up monthly by 1.1%, reaching a 13.1% year-on-year increase – the largest increase since 1979 –. Cereal and bakery products are rising at twice the general food inflation speed, with flour going up 4% just in July, according to the US department of agriculture (USDA).

“We are not at the peak [food inflation],” says Matt MacLachlan, USDA economist.

UK inflation reached double digits in July – the fastest pace in 40 years – pushed by a 2.3% monthly increase in food prices, a monthly price acceleration rate that was not even seen during the 2008 food crisis, being the hottest monthly rate in 255 months – since May 2001.

Food inflation reached 12.7%, with the government expecting general inflation to peak in October, food prices are not expected to catch a break sooner than that.

UK inflation reached a 40-year high.Thailand government pressured to raise prices
Five of the largest producers of instant noodles are demanding the countries’ governments allow them to increase the price of the staple item.

Noodle prices have been an unmovable object since 2008, with manufacturers warning of unstainable prices – even claiming to be selling at a loss – forcing them to petition authorities to allow a 33% increase in prices – from 6 to 8 baht (US$0.17 to US$0.23).

“A two-baht increment is too high and would affect low-income earners too much,” says the commerce minister of the country, Jurin Laksanawisit.

“The impact on consumers must be minimal but enable operators to survive and not have to face losses, suspend production or export all their products overseas where prices are higher. Consumers must continue to have access to instant noodles,” he underscores.

The minister signaled that a one-cent increase would be acceptable.

In Thailand, inflation stabilized this July at 7.61% compared to the 7.66% in June. However, food prices accelerated from 6.42% in June to 8.02%, following the trend of food prices being unlinked with general inflation ones.

China growth plateaus but food prices bite
With reports of China’s GDP growth and consumer spending not reaching expectations – with the country’s economy growing at 0.4% in Q2 – non-food prices declined by 0.1% in the country.

But as in other countries, food prices didn’t halt its ascend, with pork prices going up 25.6% on a monthly basis due to production capacity cuts and farmers waiting for higher prices to release more product. 

Annually pork prices are up 20.2%, with the efforts to control pork prices set by the authorities earlier this year not working as intended.

While cyclical fluctuations of pork supply and prices are a worldwide phenomenon, such volatilities are especially high in China, partly because most of the country’s pigs are produced on family farms. 

General food inflation went up from 2.9% in June to 6.3% in July.

Nigeria inflation hits records driven by food
The African nation’s inflation hit a 17-year high of 19.64%, with food prices accelerating even faster as they hit 22.02% inflation levels.

In a worse scenario, Ghana is seeking US$3 billion from the International Monetary Fund as the country’s inflation worsens, reaching 31.7%.

Yesterday, the first ship with Ukrainian grain sailing for Africa left Odesa’s ports with 23,000 metric tons of grain. The vessel is expected to sail for Djibouti (Ethiopia), where inflation has reached 33.5%.

The continent desperately needs Ukraine-Russian grain, as most countries import the practical totality of their wheat from the two warring nations.Yesterday, the first ship with Ukrainian grain sailing for Africa left Odesa’s ports with 23,000 metric tons of grain.

“The Ministry of Infrastructure and the United Nations are working on ways to increase food supplies for the socially vulnerable sections of the African population,” say the Ukraine authorities

Taking loans for food
Iceland Food Club is starting a program to give interest-free loans for grocery shoppers in the UK.

Through a micro-loan program the frozen food supermarket will allow customers to go into a maximum of £100 (US$121) of debt to purchase everyday foods. The initiative is rolling out as food prices accelerated to 11.6% compared to the 9.9% of one month ago.

Even if the maximum debt is hit, the loan program is set so customers aren’t forced to pay more than £10 (US$12) per week.

According to the supermarket, a regional trial found that the initiative reduced the use of food banks, with an increase of 71% of the likelihood of customers falling behind on rent, council tax and other bills.

To avoid customers hitting the maximum debt and being unable to take new loans, the program is set so you can only take the loans during six periods of the year that coincide with school holidays.

By Marc Cervera