In recent weeks, food prices in Europe have skyrocketed. While consumers had previously noticed supermarket items becoming more expensive, new developments only seem to be pushing prices even higher. The price increases of butter, cocoa and other commodities are a direct result of epidemic animal diseases, climate change and speculation. What does this mean for you as a supplier? What impact are the changes having on consumers? And why don’t these price increases seem to be coming to an end? We tell you more in this blog article.
Record-breaking butter prices
The price of butter has reached a record in northwestern Europe. A ton of butter now costs as much as 7,935 euros, and a full truck of butter is now worth almost 200,000 euros. The reason for this price increase is the bluetongue virus, which is spreading through the Netherlands and other European countries. Cows that become infected produce less milk. This disrupts the production of butter, driving up the price.
The spread of the blue tongue virus remains a problem for the dairy industry, not only in the Netherlands, but also in France, Denmark and the United Kingdom. While it is difficult to make an exact estimate of the overall impact, it is clear that consumers will soon feel the effects in the supermarket.
The effect of climate change
In addition to animal disease outbreaks, climate change is also playing a major role in rising food prices. According to scientists, harvests worldwide will decrease by about 20%. This has everything to do with increasing climate extremes, such as heat waves, heavy rainfall and extreme droughts. The production of crops such as grain, vegetables and fruits is becoming increasingly difficult, and this scarcity is driving up prices further.
The countries that suffer most from these price increases are often the low-income countries. These do not have the (financial) resources to adapt to changing climate and market conditions. But consumers in Western countries also feel the effects, especially in the supermarket where prices of everyday products skyrocket.
Cocoa more expensive than copper
Cocoa, the raw material for chocolate, is also experiencing huge price increases. The price of cocoa has doubled this year and has become even more expensive than copper. The main reason for this is the poor harvest in West Africa. In fact, this is where 70% of cocoa is produced. Years of extreme weather conditions, such as heavy rains and temperature fluctuations, have hit cocoa plantations hard. Farmers, often living in poverty, do not have the resources to invest in better protection for their crops.
Demand for cocoa continues to rise worldwide, especially in emerging markets in Asia. This will put further pressure on cocoa prices. For Europe, the largest purchasing market for cocoa, this means that consumers will soon have to pay more for products such as chocolate letters and Christmas cookies.
Fluctuating commodity market
Finally, there has been speculation in the commodity market, further driving up food prices. Companies are buying up cocoa and other products in order to resell them later at higher prices. As a result, supply and demand move further apart. This is called price volatility. For many chocolate producers, this means they are unsure of the prices they will have to pay for their raw materials, leading to uncertainty in the industry. Chocolatiers therefore fear the winter season with all its holidays.
What does this mean for you as a supplier?
The impact of these developments will become clear in the coming months. Higher butter prices will lead to more expensive baking products, while chocolate suppliers will have to charge consumers more for chocolate letters and Christmas treats.
But the question remains: how long can these price increases continue? As long as the bluetongue virus continues to disrupt the dairy market, climate change affects agricultural production and speculation in the commodity market continues, the end of rising food prices does not seem to be in sight.
Want to know how these developments impact your orders? Then please contact Robert Lesmeister.
