Inflation: High energy prices are now also making food more expensive

business Inflation

Expert warns of “price shock” for food

PRODUCTION - 01/29/2022, Lower Saxony, Hanover: German carrots are offered for 1.50 euros per kilogram at a stand at a weekly market.  After the price surge in 2021, consumers in Germany are hoping for an easing of inflation.  The Federal Statistical Office will announce how inflation has developed in January 2022 in the afternoon (01/31/2022) in a first estimate.  In December 2021, consumer prices rose by 5.3 percent compared to the same month last year.  Photo: Moritz Frankenberg/dpa +++ dpa picture radio +++

German consumers are used to relatively cheap groceries. This could change now

Source: dpa

Natural gas is an important raw material for fertilizers. Because of the rapidly increasing prices for the energy source, there are already signs of yield losses in agriculture. Consumers should soon feel this clearly at the supermarket checkout.

Lfood is expected to become significantly more expensive in Germany. “According to our surveys, more than two-thirds of food manufacturers are planning further price increases in the coming months,” said Timo Wollmershäuser, head of economic activity at the Munich ifo Institute, in an interview with WELT AM SONNTAG.

That’s more than ever before in reunified Germany. “Thus, food prices are likely to become a key inflation driver this year.”

This is one of the reasons why the economic researchers have upgraded their forecast for the inflation rate in Germany in 2022 to four percent. The institute even expects food prices to increase by seven percent compared to the previous year, as Wollmershäuser said.

Hardly affordable fertilizer

The background to this is, among other things, sharply rising costs for producers. According to calculations by the German Farmers’ Association (DBV), the jumps in the price of fertilizers and fuel alone are causing production costs in arable farming to rise by 20 to 30 percent. By no means every farm can or wants to go along with this.

“Fertilizer prices are higher than ever. There are farmers who no longer want to afford the fertilizer and are therefore consciously accepting the loss of yield,” says DBV General Secretary Udo Hemmerling in WELT AM SONNTAG.

At the same time, there are farms that cannot afford the high fertilizer prices. This can also lead to noticeable production losses. Nitrogen fertilizer currently costs three to four times as much as usual due to high energy costs. Because a lot of natural gas is required for the production of synthetic fertilizers.

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The DBV is therefore concerned about security of supply. “We are going into a phase of uncertainty,” warned Hemmerling. It cannot be predicted what consequences the price explosion will have for farmers.

Ultimately, consumers will feel this. “The price increase in the supermarkets is only just beginning,” said Christian Janze, partner at the consulting company EY and responsible for agribusiness there, to WELT AM SONNTAG. “Producer prices are rising sharply, which ultimately has an impact on consumer prices, especially after the next harvest,” said the expert, who even spoke of an impending “price shock”.

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