Households in the UK are facing a cost of living crisis as the price of essential items goes up and a cut in take-home pay looms in the shape of a national insurance increase.
Across the board, the latest official figures show inflation on food and drink prices was running at 4.8% in December, although that disguises bigger rises in the cost of some essentials.
In the first of a series examining the causes and effects of rising bills, we’ve looked at why some of the basic items in your supermarket basket now cost more than they did a year ago – and why there could be more pain to come.
Pasta
The cost of pasta has been pushed up by a rise in the price of its key ingredient: durum wheat. About two-thirds of the world’s traded durum wheat comes from Canada, and the extreme heat and drought that hit the country last year took its toll on crops. Other countries also produced lower harvests than expected, resulting in a scramble for supplies that pushed prices to a 13-year high.
A 500g bag of supermarket own-brand pasta that cost about 55p in late 2020 is now typically 70p – a rise of more than a quarter. According to the website Italianfood.net, planting in Italy was delayed in the autumn as a result of drought followed by heavy rains, which could affect this year’s harvest and mean prices stay high. Ultra-cheap penne could be a thing of the past.
Margarine
The latest official inflation figures showed margarine and similar spreads had risen in price by more than 27% in the year to December. On the shelves at Tesco, for example, a 1kg tub of Stork has got up from £2.10 to £2.65 since last January. Meanwhile, the official figures showed cooking oils were up by 13%. It’s the oil in margarine that has pushed up the price: rapeseed and palm oil have hit record high prices in recent months.
Bad weather conditions in Canada and Europe are again to blame in part, as is Covid. Rapeseed crops were hit by drought and high temperatures, while Malaysia, a big producer of palm oil, imposed restrictions on foreign workers and on the number of people at work in the industry in an attempt to slow infections. Another factor is the rise in the price of crude oil that has boosted demand for the oil crops for biodiesel.
Milk
At farm level there has been a 24% increase in the cost of producing milk since January 2020, says John Allen, a managing partner at Kite Consulting. “That’s a massive rise, and the biggest since 2007-2008 when we had a spike in commodities.”
Probably the biggest factor is the cost of feeding cattle, he says, which has been driven up in part by the cost of fertiliser which, in turn, has been driven up by gas prices. Farmers have also faced rising labour costs and machinery prices. “The price of producing a litre of milk has gone up from 28p in January 2020 to 35p this spring,” Allen says. Then the processors face higher costs, with energy and labour prices on the up. As a result, he says, consumers are typically paying 7p-10p more for a litre of milk.
And it’s not over. Although only about 10% of milk is traded globally, the price influences what we pay for domestically produced pints. Efforts by governments in countries such as New Zealand and the Netherlands to cut dairy farming for environmental reasons means supply is falling. Demand is rising by 2% a year. That puts upwards pressure on prices. “We’ve got rising demand and we’ve got a fixed supply,” says Allen. “We think this spring there will be further increases. It wouldn’t be unrealistic to expect 20% rises – we’re in for significant inflation in dairy.”
Sausages
An increase in the cost of processing meat and moving it around is leading to higher supermarket shelf costs for sausages, says Sarah Baker, an economic strategist at the Agriculture & Horticulture Development Board.
“Pork farmers aren’t getting good prices,” she says. “Processors are paying more for labour, there are absences because of Covid, and then there’s the rising cost of transport, with the shortage of HGV drivers and rising fuel costs.”
Baker says abattoirs have struggled to replace skilled EU workers who worked as butchers and packers but have left the UK as a result of Brexit.
Beef prices have been pushed up by some of the same issues, and also by demand. Throughout the pandemic, demand for products such as mince has remained high as people have cooked at home instead of eating out. “The key drivers [for inflation] are your input costs – feed and fertiliser – and labour and transport. Then you have the EU aftershock – the loss of very skilled labour. And then there’s Covid.”
Coffee
That morning caffeine hit will cost you more as long-term issues around climate change combine with short-term problems caused by the pandemic. The wholesale price of Arabica coffee, used in ground coffees, surged 70% last year while Robusta, more commonly used in instant, jumped 60%, according to analysts at Rabobank. This is after one of the biggest producers, Brazil, suffered from a mix of droughts and the worst frost in over two decades.
The price of coffee has also been forced up by problems in global shipping. The cost of shipping a container soared 240% last year while concerns about securing deliveries prompted some buyers to stockpile. Brands tried to hold back those costs but they are now filtering through to the shelves. Almost 100 different coffee products rose in price in the supermarkets this month, according to Assosia data for The Grocer trade journal. Its survey registered some packets instant coffee rising by as much as a third in price. Others rose by a more modest 4% or 6%.
Crisps
It’s a tough time for salty snack lovers as the price of some of the UK’s favourite brands has shot up in the past year. The average price of Pringles, for instance, rose by 10.3%, Sensations were up by 8.8%, and Quavers up 8.5% in September last year, according to The Grocer. More recently, its first weekly grocery basket survey of 2022 showed a six-pack of Walkers crisps had gone up by 6% to £1.53.
Prices are being pushed up by a host of factors, ranging from increases in oil prices and energy costs to the ubiquitous HGV driver shortages that have raised the price of distribution. The cost of producing potatoes is also on the rise, with every aspect, from labour, transport and fertiliser costs, up by more than 10%. There have also been specific problems linked to Brexit. There is a still unresolved issue on the trade in seed potatoes, which hits the trade in the export to Europe and the import of European seeds.
Toilet roll
The rising costs of paper pulp, transport and energy are all being absorbed by buyers of toilet roll and nappies. In recent weeks, manufacturers have spoken about the impact of higher input costs, and talked of plans to pass them on to retailers and consumers.
Accrol, which makes toilet roll for shops including Tesco, Aldi and Morrisons, said this month it would have to put up its prices. Last week, delivering its latest set of accounts, its chief executive, Gareth Jenkins, outlined the problems: “Tissue pricing has reached unprecedented levels, driven by escalating energy costs (rising as much as 500% for certain suppliers) and global sea freight charges, combined with increased UK transport costs, resulting from HGV driver shortages.”
This week Essity, which makes the Cushelle and Velvet brands, said it would be putting up prices again this year. Wood pulp prices have been driven up by shipping delays as well as changes in consumer behaviour that have boosted sales of paper products at home and demand for cardboard to pack home deliveries.
