Food prices obviously vary between types of food, level of manufacturing and seasonal availability - for instance, increases in the cost of livestock, particularly cattle and sheep, have led to large increases in the price of red meat.
It is interesting to note, however, that while the price of livestock in the saleyard has continued to increase past 2014, the price of manufactured or processed meat dropped off in 2016 and didn’t surpass 2016 again until the March quarter in 2019. Unsurprisingly, retail beef prices maintained the 2014 price increases throughout that drop-off in manufactured meat prices.
Similarly, while the farmgate price of vegetables has shown no net growth since the early 2000s, retail vegetable prices have grown almost as strongly as beef and lamb. Comparing the stages of production for individual product lines indicates retailers make their largest margins in both fresh products such as fruit and vegetables. They take far lower margins on products such as milk and breakfast cereals.
Now the signposts point to stronger retail food prices: farmgate and processor output prices have all jumped strongly in recent quarters across almost all food types and while the end of price wars has been reflected in increases in food CPI above the general economy-wide CPI, all indications are that there are many more to come.
What remains unclear is how far retailers are prepared to go in increasing prices and what - if any - flow on effect will this have on farmgate prices and processor margins.