High inflation is entrenched in the economy and many households admit they can’t afford basic expenses
Prices have skyrocketed and no analyst dares predict when they will peak. Last March, inflation (CPI) hit 9.8% and the Executive promised that would be the limit. April and May were right, but in June the situation got out of hand. For the first time in four decades, the CPI has crossed two digits, and more than the figure itself (10.2%, according to data presented by the INE on Wednesday), what’s scary is how far we’ll go.
More comes to the greengrocer to give us a surprise when we search the box. Potatoes, tomatoes, peppers or onions, basic products in the shopping cart of every Spanish family for which you now have to pay between 8% and 10% more than a year ago. Of the basic products, eggs have increased the most (+25%), reaching an average of more than 2 euros per dozen.
Oil is one of those products that everyone has seen rise to 45% in a year to pay 3.90 euros per liter, while it did not exceed 2.70 twelve months ago. But one of the main protagonists of the week was without a doubt the watermelon, a typical summer fruit for which the Spaniards have to pay more than EUR 5.30 per kilo after it has become more than 20% more expensive.
The pandemic has left many Spanish families in a very vulnerable situation, families who now feel completely drowned out by the economic situation. A report from the consultancy Kantar warns that 4% of households can no longer afford to buy even the most basic food in the basket, when they did not have these problems before the pandemic and high inflation. And not just food, consumption is hampered by extremely high prices: 8% can’t pay the household bills, 14% don’t even consider coffee in a bar and 9% eat in a restaurant.
The statistics are revealing when it comes to considering major expenses such as having to replace an appliance (27% say they can’t afford it now), a new cell phone (29%) or changing a car, making a purchase for which 55% of Spaniards confirm that they could not afford that expense now because they spend most of their resources on the grassroots.
In houses, more goes out than comes in. This is reflected in the statistics for the first quarter, which indicate that while consumer spending increased by 14%, the savings rate fell to -0.8% of disposable income (7.5% excluding seasonal effects).
But what is the reason for this runaway price increase? Mainly the war in Ukraine, although there was already an upward trend before the outbreak of the conflict due to the ‘boom’ in demand after the pandemic.
The experts consulted acknowledge that the lack of grain from Ukraine is causing the food market to collapse. On the one hand, because all products derived from cereals (flour, pasta, pastries, bread, pizzas…) have shot up their prices due to the fall in imports. And they will continue to do so in the coming months, said Juan Carlos Higueras, an expert professor of the agri-food sector at EAE Business School.
In addition, farmers have to take into account rising costs for fertilizers and fuels, which will drive up the prices of fruit and vegetables.
And on the other hand, as farmers face rising costs as animal feed (grain derivatives) makes their production more expensive to a point where some consider reducing or leaving the business.
“Livestock farmers are paying much more expensive feed for their animals, driving up meat prices,” explains Higueras, who predicts that after the summer there will be a shortage of chicken meat in supermarkets because it is animals that eat a lot of grains and ranchers are already making losses, which “production will decrease and prices will rise sharply”.
If the evolution is seen since 2021, there was already an increase in agricultural food, which an Allianz report calculates at 31%, something that has blown the war and predicts it will increase by another 23% in 2022 due to the increase of inputs (fuel, electricity, fertilizers…).
Despite the increase in food prices, the company calculates that retail prices have only been adjusted by 6%, meaning that less than half of the increase in producer prices has been passed on to the final consumer.
So is the solution to grow more? It’s not that easy. Our country harvests 25.4 million tons of grain per year, but the Spaniards consume 36, which makes us a net importer of grain.
And Brussels has raised its hand to cultivate the land it was forced to keep fallow, but it’s only about 600,000 hectares of which it’s not even known whether farmers will want to work because of rising production costs. “Cultivating fallow land means rotating the land more, depleting it for new crops. You need more fertilizers and that probably won’t be profitable at current prices,” says the EAE Business School professor.
The PAC, for its part, also admitted to the temporary easing of phytosanitary requirements (insecticides) for grain imports from previously much more heavily monitored countries, such as Argentina and Brazil. Something that will “dampen” the effect of the lack of Ukrainian grain, but will not cover all autumn, adding the prices at which this product is imported from the other side of the world, with cargo ships crossing the Atlantic .
In 2021, when only Putin knew that the invasion would take place a few months later, Spain mainly imported cereals from France, Ukraine and Brazil, with a purchase volume of 3,343 million euros. But the conflict broke out and everything changed.
While our country positioned Ukraine as the main supplier of grains in January and February (respectively 222.5 and 198 million euros), almost doubling purchases from France, the downward trend started in March, ending April with only 5 million euros in Ukrainian grain imports. Of the Exporters Club, its president, Antonio Bonet, notes that since the beginning of the 21st century, Ukraine has become, together with France, the main supplier of this product for Spain, alternating between the first and second positions.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
