Food inflation was almost 50% in four years

If you have the feeling that you can buy fewer and fewer products on the market while spending the same amount of money as before, know that you are not alone. And it’s not “thinking”. Food inflation has been well above the general index in the last four years.

From January 2020, just before the start of the pandemic, until August 2024, food at home became almost 49% more expensive, according to IBGE. This group includes all food and drinks purchased in supermarkets, grocery stores and other types of stores, for consumption at home.

Meanwhile, general inflation for all products and services – measured by the Broad Consumer Price Index (IPCA) – was approximately 31% in the same period. The data was compiled by André Braz, coordinator of FGV Ibre’s Price Indices and specialist in inflation.

He highlights that the category of cereals, legumes and oilseeds (such as rice, beans and others) has risen by just over 85% since January 2020. Vegetables, tubers and roots (potatoes, onions, tomatoes, carrots, peppers and others) have remained even lower. more expensive, with an average increase of over 97% in the same period – that is, they practically doubled in price.

Eggs, the most affordable protein, did not escape: the average price increased by 46% in almost four years. Vegetables and vegetables became 84% more expensive. Fruits, 91%. Some relief came from meat and fish – which, according to IBGE measurements, were respectively 15% and 17% more expensive, below average inflation.

Braz explains that there is no single reason for the increases. During the pandemic, demand grew and, as market rules dictate, when demand increases more than supply, the price increases. In 2021, the water crisis damaged many crops and, consequently, supply and price. Even Russia’s war against Ukraine interfered, as the conflict drives up commodity prices, which are set internationally.

In 2023, says Braz, there was a truce. However, now in 2024 the El Niño phenomena, in the first half, and La Niña are once again affecting the plantations.

The problem with food inflation is that it affects poorer families proportionally more, as the weight of these products is greater in their budget.

“The inflation of the main items that make up the basket of these families rose much more than the average inflation. And salaries are adjusted for average inflation. So, if the salary was corrected by 31%, food went up by almost 50%”, he explains.

The middle and upper classes do not feel the pressure of food prices, but the space they have to reallocate their household budget is greater. For the poorest, the erosion of purchasing power will mean less food on the table.

“Low-income families are more sensitive to food. They see much stronger inflation because they earn little and spend most of their salary on food. There isn’t much left over for other expenses”, observes Braz.

“For them, when food becomes more expensive, it means they need to pay more to get the same amount of food. This is bad because it worsens the quality of life, increases hunger and inequality. If what I earn is only enough to eat and it’s getting worse and worse, this is the worst case scenario”, he adds.

The solution to make money return more is not so simple. Firstly, because it depends a lot on the next harvests – and the country faces serious climate problems, in addition to the fires. This week, the supermarket association warned that prices are likely to rise in the coming weeks because of the drought affecting much of the country and the fires.

Secondly, because the relief for the pocket is conditional on the labor market heating up. Which is on the rise, according to figures released by IBGE and Caged, from the Ministry of Labor. However, wages, even though they are rising, do not necessarily follow the price of food.

“The latest data from IBGE and Caged show that employment is improving. The unemployment rate is low and the economically active population rate is high. The problem is that you don’t see salaries rising significantly. This creation of formal employment is not highly specialized, and therefore the average income rises very little”, points out Walter Franco, professor of Economics at Ibmec-SP.

Franco and Braz explain that the perception that consumer prices rise more than official indices has to do with the research methodology.

The IPCA calculation, carried out by IBGE, is very comprehensive. It seeks to point out the variation in the average cost of living for families with a monthly income of one to 40 minimum wages (from R$1,412 to R$56,480) and covers hundreds of items, including airline tickets, gasoline, office items, energy and goods that are not purchased frequently (car, household appliances, electronics and others).

This “spread” ends up diluting the overall index. As food is the main expense for many families, the perception remains that inflation is actually rising much more than announced.

Even food inflation can give this impression. In 12 months, the food and beverage group became 4.6% more expensive, according to IBGE. But certain items rose much more: the price of ground coffee rose 17% in one year; rice became almost 28% more expensive; onions rose 34% and potatoes rose 51%.

On the other hand, French bread rose by around 2% and black beans by just over 3%. Also according to IBGE, the average price of meat fell by 2%, carrots became 23% cheaper and the price of tomatoes fell by 25%.

How can the country reduce pressure on food prices?

Two factors are essential to bringing relief to the family budget when it comes to food: the climate, which interferes with harvests, and the creation of more jobs with better wages. The outlook is not the best.

“We have a drought in the La Niña account that could maintain inflationary pressure on food between 2024 and 2025. Even if prices don’t rise much, they won’t have much room to return such increases amid these climate effects”, analyzes Braz, from FGV Ibre.

The fires and drought that cross the country are already causing a rise in food prices, which are expected to close the year with inflation of 6.3%, according to a Bradesco study. In the wake of climate problems, energy is also expected to rise. There is a risk that the tariff will remain red flagged (with an increase) until the end of the year.

“Most of the effects of the drought are mapped and incorporated into the scenario, but the return of rain will be important to define the energy and food situation in the coming months”, says the Bradesco analysis.

Faced with the shrinking shopping cart, Brazilians, who are already experts at surviving inflation given the country’s history, return to the known alternatives of buying less, changing brands and making substitutions when possible.

“Last month we had deflation. It was a break, but in the coming months there may be a small rebound due to food and energy. Until the end of the year, food inflation is unlikely to subside. There would have to be a very specific conjecture to reduce it”, analyzes Franco, from Ibmec-SP.

The professor emphasizes that the way forward is to improve salaries and continue creating jobs. And that’s where the problem lies: for this, there needs to be private investment, which will only happen if Brazil is attractive. “Today it is very unattractive, there is a lot of bureaucracy, interest rates are high”, he says.