Biggest fall in food prices for 50 years

Fruit and vegetables are nearly 10 per cent cheaper than they were a year ago. Photo / Richard Robinson

Food prices dropped by 2 per cent in the past year - the largest annual fall since records began more than 50 years ago.

The Food Price Index, released yesterday, shows that fruit and vegetables are nearly 10 per cent cheaper than they were a year ago.

In what is the first annual fall in the category since August 2004, grocery foods have dropped by 1.4 per cent, indicating that competition between supermarkets might be forcing prices down.

But the fall is against price rises of 16.6 per cent between July 2007 and July 2009, when they peaked.

The biggest price drops were for lettuce (down 29.7 per cent), fresh chicken (down 13.5 per cent) and potato crisps (down 10.8 per cent). Meat, poultry and fish are down 3.9 per cent.

Among the biggest prices rises were Cheddar cheese and butter, going up 11.1 per cent and 27.6 per cent respectively. Soft drinks were up 4.7 per cent and milk up 4.4 per cent.

Chris Pike, prices manager for Statistics New Zealand which runs the survey, said the falls could be a response to the big prices rises seen last year.

"Prices going down is always bad for farmers and good for consumers," said NZ Beef & Lamb chief executive Rod Slater. "Whilst we've had record prices for lamb in this country because of the rate of exchange that we've got, the farmers aren't really seeing the benefit of this. Their production costs have gone up as well."

Horticulture NZ expressed the same concerns, with a spokeswoman saying any price drop meant farmers were getting less for their produce.

Food and Grocery Council chief executive Katherine Rich said the FPI figures were a timely reminder of the gap between reality and perception over food prices.

"Fruit and vegetables, meat, poultry, and fish, and grocery food are all cheaper than they were this time last year. This news comes days after consistent media suggesting that food prices are out of control.

"We also suspect that the fall in groceries has a lot to do with the intense competition between the two supermarket chains and the competitive discounting that has been occurring on many grocery items.

"While there has been an increase in some dairy products, this simply reflects improving international commodity prices. The prices we pay here for all our food products will always be influenced by the value of commodities internationally, as our local producers seek the best price for their products."

Food Prices

Down:
* Fruit and vegetables: 9.2 per cent
* Meat, poultry and fish: 3.9 per cent
* Grocery food: 1.4 per cent

Up:
* Restaurant and ready-to-eat food: 2.2 per cent
* Non-alcoholic beverages: +1.3 per cent

Total: -2 per cent

- Source: Food Price Index - year to June 2010