The price of several agricultural raw materials is panicking, and could well push up consumer prices.
Are we really done with inflation? If the time is for economic pessimism, between rising debt and deficit, the slowing down of the surge in prices was at least a reassuring prospect. The price increase fell below the symbolic threshold of 2% in August, and even reached its lowest level since July 2021 in September. However, in recent months, the price of several agricultural raw materials has shown a record increase… What should worry the French wallets again?
It is in the breakfast section that the increases could be the strongest. A tonne of butter peaked at 8,200 euros at the end of September, an increase of 92% in one year. Sugar stood at 23.3 cents per pound, its highest price in six months, while the price of coffee has increased by 147% on average this year. World cocoa prices have also soared over a year, exceeding $10,000 per tonne in New York at the start of the year, while the price for delivery exploded by around 170% over a year in London in September. Finally, the pound of frozen orange juice concentrate crossed the $5.50 mark in New York, an increase of 175% compared to January 2023, while the price of olive oil increased. jumped 300% over three years.
Also readThe easing of prices for agricultural raw materials provides some relief to breeders
Unfavorable climatic conditions
If 2022 inflation was due to soaring energy prices, this time it is climate disruption that is to blame. Brazil, the world’s leading producer of sugar and coffee, was affected by severe droughts and fires, while the El Niño phenomenon disrupted production throughout Latin America. The drought has also not spared Ivory Coast and Ghana, responsible for half of the world’s cocoa supply, which respectively increased their prices by 20% in September and 45% for the 2024 season – 2025. Record heat and reduced rainfall have also disrupted coffee crops in Southeast Asia, not to mention Typhoon Yagi which partially destroyed production in Vietnam. Finally, yellow dragon disease ravaged orange crops in Brazil and Florida, while the southern US state was hit by Hurricane Ian and cold waves.
Butter production is an exception here, because it is European production which has marked time. The cause: bluetongue, or BTF, which spreads on farms and causes milk production to drop, coupled with summer drought. More and more breeders are also opting for the production of cream, considered more profitable than that of butter. Finally, the dairy giant Lactalis has reduced its annual collection by around 450 million liters out of the 5.2 billion collected on average each year. The dairy giant plans to gradually reduce its purchases to reach 9% of the total harvest by 2030, in response to the increase in breeders’ prices last April. Lactalis also exports no less than 20% of the butter collected in the United States, China and certain countries in South-East Asia, which lowers the supply in France and pushes prices up.
Towards price increases on the shelves
These changes will not be without consequences for household wallets. “There will inevitably be an impact on consumer prices, because these are significant and lasting increases.explains Madrigale Darpas, analytics director at NielsenIQ. For products such as coffee, sugar or cocoa, production is largely concentrated in a few countries, which risk being affected more and more frequently by climatic hazards. The rise in prices is all the more inevitable as there are no other countries to turn to to import at a lower cost. These are also products for which demand is increasing sharply around the world, particularly in Asia, which is further driving prices upwards.. Global demand for cocoa increased by 4.5% this year, and that of olive oil by 3%. And the increase in prices could be even greater as wheat, sugar, olive oil or cocoa are used in the manufacture of many derived products, leading to a potential cascade of increase.
The first effects are starting to be felt: the price of a chocolate bar has increased by 3.8% on average this summer. “This is just the beginningassures Madrigale Darpas. There is always a latency period before prices increase, because the agri-food giants can absorb the increase in their costs for a while.. Most price increases should therefore take place at the beginning of 2025, after price renegotiation by distributors. Artisans should also be particularly affected, in particular bakers, pastry chefs or chocolatiers, whose activity is largely based on one or more of these raw materials. “They have less negotiating power vis-à-vis their suppliers, and freely set their prices”explains Madrigale Darpas.
A limited price increase
The agri-food giants, however, face certain limits. Thus, they do not want to increase the price of price markers too sharply, such as butter, which risks repelling customers. For this type of commodity, it is often more profitable to sell in large quantities than to sell at a high price, which works in favor of consumers. Furthermore, “the share represented by agricultural raw materials in the price of a food product is often low: it is the packaging, energy and labor which occupy the most important part”details Madrigale Darpas. “In addition, the overall price of raw materials is down by 10% on average over the year: it is therefore a one-off increase in certain products, which should not cause overall prices to rise.”
Finally, when it comes to butter, the repercussions could be controlled. Manufacturers can in fact import in part from the United States or New Zealand, major butter producers where the price per tonne is below 6,000 euros. A vaccination campaign against FCO including 5.3 million doses for cattle also started on August 12, while vaccination has just been made free throughout the country, which will undoubtedly improve the situation of cattle. French breedings. Finally, the arrival of autumn could also help stem the epidemic, because the midges responsible for the spread of FCO do not survive cool temperatures. “In the case of butter, a price increase seems less likely, as one-off cost increases can be absorbed in the short term”assures Madrigale Darpas. Nothing alarming, in short… even if the page on inflation does not seem entirely turned.
