Eating a hole in your wallet

Photo / Dean Purcell

Food prices are continuing to rise but have steadied after reaching record highs last year and some products, including milk and cheese, have become cheaper.

The food price index, released yesterday by Statistics New Zealand, shows that food prices are up 4.6 per cent in the year to August.

But prices have stabilised after sharp increases throughout last year, when rising grain and fuel costs pushed them up.

The index shows that food prices dropped 0.9 per cent from July to August - the largest fall in the index since February 2006.

Those in the meat, seafood, dairy and grain industries say annual figures provide the clearest indication of food prices because weather patterns, the dollar and fluctuations in supply and demand can influence monthly data.

In the past year, grocery food prices - which exclude restaurant and ready-to-eat meals - increased by 4.4 per cent, the lowest annual increase since September 2007.

A basket of items bought by the Herald in April last year from Victoria Park New World totalled $142.89.

At the time, chicken prices had risen by up to 25 per cent because of increases in the cost of fuel and the grain fed to chickens. Pork was tipped to follow. This week, the same basket cost $150.41 with pork, lamb, bread and flour showing the larger increases.

The index revealed that cheddar cheese prices are down 21.1 per cent. But the block in our basket was down just 13.4 per cent - and the block itself has been shrunk by 10 per cent.

Experts spoken to by the Weekend Herald agreed markets had steadied after record highs last year, but said most product prices were still dependent on the exchange rate and overseas demand which set local pricing.

Peter McClure, managing director of Fonterra Brands New Zealand, could not explain why the cheese in our basket was cheaper, but butter and milk was not, despite the index showing butter and milk down 29.6 per cent and 4.8 per cent respectively.

"As a wholesale supplier, Fonterra has made substantial reductions in the cost of cheese and butter, and fresh milk prices have also reduced over the past year, but ultimately the end prices are set by the retailers."

Beef and Lamb chief executive Rod Slater said lamb prices were higher than other meats because of low supply and high international demand. Pork Industry Board chief executive Sam McIvor said pork prices had increased, as predicted last year, which reflected last year's high grain prices.

Although grain was cheaper now, farmers were still paying high rates because they signed contracts a year ahead.

Fruit and vegetable prices were down 1.1 per cent, with lettuce and potatoes accounting for most of the decrease.