Labour shortages, supply chain crunch cited for continued rising food prices

Food prices continued to climb in September – for a sixth consecutive month – driven by sharp rises in meat, poultry and fish as supply chain issues and labour costs bite producers.

The price of chicken rose by 10 per cent while fresh eggs went up 12 per cent and roasting pork was up by 8.7 per cent, according to Stats NZ. Grocery items like chocolate biscuits (up 6.1 per cent), and sweets (up 3.2 per cent) also featured in the report.

Overall food prices rose 0.5 per cent in September compared to August 2021, the latest report said. After adjusting for seasonality, prices rose 0.9 per cent.

“The weighted average price of cage or barn-raised eggs rose sharply to $5.22 a dozen, up from $4.65 in August,” consumer prices manager Katrina Dewbery said.

“Egg prices previously peaked at $4.81 a dozen in July 2021.”

Infometrics senior economist Brad Olsen said labour shortages combined with higher wages and a general increase in production costs and supply chain restrictions were some of the reasons for skyrocketing food prices.

“With food prices continuing to rise and at a faster clip than what we’ve seen in previous times, household budgets are again being squeezed with higher prices across the board.

“Obviously, food and a number of these food products that we’ve seen go up in price are family staples, and so that is going to be weighing on New Zealand households as they figure out how to pay the bills.”

On the flip side, fruit and vegetable prices fell in September 2021, down 1.5 per cent, largely due to falling prices for cucumbers (down 33 per cent), capsicums (down 28 per cent), and lettuce (down 21 per cent). These were partly offset by rising prices for tomatoes (up 3.0 per cent), apples (up 7.0 per cent), and pineapples (up 15 per cent).

“In the last few years, tomato prices have tended to peak in August before falling slightly in September,” Dewbery said.

“This September, tomato prices rose slightly to a weighted average price of $16.27 per kilogram, up from $15.79 in August.”

Overall, fruit and vegetable prices did not drop as much as they typically do in September.

After adjusting for seasonal effects, fruit and vegetable prices rose 2.3 per cent in September.

The largest annual increase in over a year.

Annually, food prices increased 4.0 per cent in September 2021, mostly due to higher prices for fruit and vegetables (up 9.3 per cent), restaurant meals and ready-to-eat food (up 4.6 per cent), and grocery food (up 2.9 per cent).

September’s annual movement is the largest since August 2020, when prices increased 4.2 per cent.

The annual increase in fruit and vegetable prices was mainly influenced by higher prices for tomatoes (up 23 per cent), lettuce (up 52 per cent), and grapes (up 28 per cent). These were partly offset by decreasing prices for kumara (down 44 per cent) and avocados (down 34 per cent).

Olsen said consumers were bearing the brunt of labour shortages and supply chain restrictions.

Movement restrictions due to Covid-19 meant businesses had to pay higher costs for production even though the raw materials were available domestically.

“It’s making it more difficult to move product around. And it’s also harder to bring different products into the country. As well as that we’re seeing that the prices that businesses are having to pay for their own inputs are going up.

“So for example, when it comes to chicken, we know that costs incurred for the likes of Tegel and other chicken providers have increased and those businesses are having to pass on those costs to consumers. And that’s why we’re seeing and part food prices are starting to rise higher.”

He said a lot more of our food products including chicken and tomatoes are being produced domestically.

But, the price of the food had increased due to an increase in production cost, not necessarily because the raw materials were expensive.

“And that’s [cost] being passed on to consumers,” Olsen said.

This was a higher inflationary environment and the prices were most likely to hike next week when the inflation numbers get released again.

“Tomatoes are quite a good example where we’ve seen them increase further again, to possibly the highest price on record.

Olsen said the latest food price data was a good example of an inflationary environment.

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