The cost of food, Part 1 – Understanding price rises

Of all the things we'd all love to afford, buy and own, there's really only one that we can't do without. Sustenance.

Unfortunately, over the last couple of years it's become clear that the cost of food is beginning to have a real impact on the cost of living, and, for some of the poorest families in the country, the cost of survival itself.

In Part 1 of this two-part feature, I'm going to look at why this massive hike in food prices in the UK has happened. After all, it's at the consumer's level that the impact is felt - so it makes sense to try to understand what's going on.

In Part 2 (coming shortly on thenewiceage.com), I'll show how these price rises are likely to affect you and your family, and offer some tips as to how frozen can help you cut your household food budget and continue to live to the standards you've got used to.

Why has food risen so sharply in price?

As the UK's a net importer of food (i.e. we bring more in than we ship out!), it's impossible to come to sensible conclusions about the issue without looking at the wider global picture. Here are some of the most important factors contributing to the huge rise in our basic cost of living over the last year or so...

Oil prices

The first and most obvious reason is the dramatic volatility in the cost of oil. In Jun/Jul 07 the cost of oil went through the roof but has now fallen back to relatively normal levels. The impact of this over time is hard to exactly judge, but there will be long-term ramifications of this volatility, regardless of the day-to-day price of a barrel of oil, and these are what we still dealing with now.

Of course, this also has an immediate impact on the cost of transportation of raw ingredients from one country - a cost that is then passed on to the consumer. Another repercussion is the increase in the price of fertilisers, which depend to large extent on oil derivatives. It follows that if it costs more to ensure successful harvests, the chances are that the supply of food will fall, increasing prices still further.

Devaluation of sterling

As an importer, the UK needs a strong pound so that the money we spend abroad on things like food goes as far as possible. The recent rapid devaluation of sterling means that imported food is now costing us more, and, again, the extra cost falls on the consumer.

Poor harvests

The number of very poor harvests in the world's 'bread-baskets' such as Australia and parts of South East Asia is another factor; too little rain in some places and too much in others has meant a big drop in supply while, of course, demand remains the same. The jury's still out on whether this is just a freak occurrence or whether climate change is causing permanent changes to the weather patterns in important food producing areas. Either way, the simple fact is that poor harvests mean ever-higher prices. And unfortunately, there's a further important knock-on effect to consider as well; livestock depends on grain to grow and live, rising grain prices mean rising prices of all food - wheat, dairy or meat.

Biofuels

Encouraged by US government subsidies, grain farmers are increasingly growing their crops for use in biofuels - so the supply of grain for food is reduced still further. Admirable though such experiments may be in terms of the fight against carbon emissions, the fact is that they make their own contribution to rising food prices.

Protectionism

The last main factor behind rising prices is the protectionist policies pursued by some countries, something that might yet worsen further as individual economies seek to protect themselves through the downturn. The imposition of restrictions on the amount of food that a country can export will obviously have a direct and limiting effect on the supply to the world market.

Added together, all these factors - the rise in the cost of oil, the global economic disaster, poor weather conditions, a change in attitude towards the environment, and so on - have conspired to raise the UK's national food bill quite significantly in only a year for every household in the country. And, of course, because business is business, the rising costs are not borne by the supermarkets but passed directly onto you and me - the consumers.

So those are the fundamentals of why we are where we are; next time, I'll show you how to do something about it… by using quality frozen food to tackle rising prices head on and make your money really work hard for you!