Bank of Spain warns of consequences of war in Ukraine as a factor of upward pressure on food prices
It’s no secret that the basket price increase has become one of the main concerns of Spanish families. The impact of the war in Ukraine, which affected energy prices first and then food prices, has led to runaway inflation reaching 10.8% in Spain in July.
A fact that food has been gaining weight in recent months, with special emphasis on consumer basics. Oil, for example, has been paid for at the price of gold and, according to calculations by the Bank of Spain, is already 56% more expensive than a year and a half ago.
The agency released a report on Wednesday analyzing the impact of the rise in commodity prices on inflation and its shift to the price of food. And according to the results obtained, in the eurozone as a whole, 93% of the foodstuffs included in the harmonized price index (IPCA, which compares inflation between the different countries of the eurozone) scored extremely high in historical terms in June.
This percentage barely reached 27% and 54% in the two previous periods of strong growth in raw materials, in the periods 2001-2002 and 2007-2008.
When compared by country, the analysis by the Bank of Spain also shows how the rise in basic food prices in our country has been stronger than in the eurozone average. Notably, the price of oil rose by 37% in Spain in June, compared to 29% in the region.
Cereals, coffee, dairy products and eggs, and meat rose by about 16%, 11%, 16% and 10% respectively, while the increase in the eurozone as a whole was 11% for grains and coffee, while dairy products, eggs and meat rose by about 12%.
Taking January 2021 as a reference, oil is now 34% more expensive in the Eurozone, compared to the 56% increase in Spain. Cereals and dairy products and eggs are respectively 12% and 13% more expensive in the region, while in Spain, since the beginning of 2021, cereals have increased by 17%, dairy products and eggs 16%, and meat 10%. .
The Bank of Spain estimates that if food commodities temporarily rise by 10%, “after 12 months, headline annual inflation in the euro area will rise by about three-tenths”.
Moreover, this increase is gradual, “due to the fact that value chain producers and retailers initially absorb higher raw material costs and gradually pass them on to the final consumer.”
The body headed by Pablo Hernández de Cos recalls that futures markets point to a certain downward trend in food prices in the coming years. However, he warns that the war in Ukraine “would continue to put upward pressure on these prices”.
They recall that both countries are major producers of food commodities, such as grains, “and that their production and export capacity is significantly limited.” In addition, the conflict affects the prices of energy and fertilizers, two crucial raw materials in the production process.
The Bank of Spain also warns of the impact of the adverse climate that has also forced some countries to ban or restrict exports of certain food commodities, “which puts additional stress on global food supply chains, with the potential to cause very persistent additional increases in the international prices.
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.
