Produce prices drop for seventh month in a row

Fruit and vegetable prices have dropped for seven months in a row.

The monthly Food Price Index, released yesterday by Statistics New Zealand, shows that food prices rose 0.7 per cent in the year to February 2010 - the lowest increase since a 0.4 per cent annual increase in April 2005.

Monthly data for February show fruit and vegetable prices dropped by 3.5 per cent but monthly data are subject to high fluctuations due to unpredictable influences, such as the season and weather patterns.

However, annual data show that in the year to February, restaurant and ready-to-eat food prices rose by 2.2 per cent, non-alcoholic beverages rose by 2.5 per cent and grocery food went up 0.6 per cent.

The biggest annual individual food price rises included lamb chops (up 20 per cent) and sugar (up 38 per cent).

Meat and Wool NZ economist Rob Davison said lamb prices had risen because farmers were coming off a three-year drought and had just seen a wetter summer which had left them with excess grass to feed stock.

In a bid to make the most of the supplies, farmers were holding on to lambs for longer so they could sell them heavier and for more money, he said.

Hanging on to stock had created a temporary shortage in lambs, which had helped drive prices up.

BNZ chief economist Tony Alexander said he was not reading too much into the food price changes because they could be volatile.

But, he expected to see a 2 per cent increase in food, particularly meat and grocery items, within a year.

"With the world economy recovering, it tends to place upward pressure on these things."

KEY CHANGES

Up

* Tomatoes + 31.3 per cent
* Lamb chops + 20.7 per cent
* Soft drinks + 3.4 per cent
* Sausages + 13.7 per cent

Down

* Potatoes - 20.1 per cent
* Kiwifruit - 31.1 per cent
* Porterhouse/sirloin steak - 11.1 per cent
* Chicken - 5 per cent

Note: Statistics used are from the annual Food Price Index data.