Food may have the biggest monthly price drop in 24 years – 08/09/2023 – Vaivém

Food started August with a drop of 1.4%. If this rate is maintained throughout the month, it will be the largest monthly inflationary reduction in the sector since May 1999.

The data are from Fipe (Foundation Institute of Economic Research), which released this Wednesday (9) the first quadrissemana of August. The period compares the average prices of the last four weeks in relation to the immediately previous four.

If in the short term it is good news, this drop is still far from relieving consumers’ pockets, especially for those with lower incomes. The cumulative increase from 2019 to 2022 was very accelerated.

Food inflation has evolved by just 0.23% this year, with an accumulated 1.84% in 12 months. This strong drop in the pace of price increases, however, still has little expression when one looks at the behavior of food prices in recent years.

Since the beginning of 2019, when some products started to skyrocket, average food inflation remains at 57%, still above general inflation, which is 32%, according to the Fipe Consumer Price Index.

The acceleration of inflation in the last four years was due to the strong external demand for food and the Brazilian capacity to supply the external market. With world stocks reduced due to climate effects and geopolitical conflicts, such as Russia’s invasion of Ukraine, international prices soared, bringing this pressure to the country.

Soybean oil, a basic ingredient in the kitchen of most Brazilians, is an example. The country had record soybean exports, and domestic prices for the oilseed, at some points in 2022, reached BRL 200 per bag in Paraná, well above the BRL 83 of 2018.

World demand for soy oil has grown, including because of the difficulties Ukraine has in producing and exporting sunflower oil, and international prices have evolved rapidly.

Internally, consumers paid 164% more for the product in supermarkets from 2019 to 2022. This year, oil has dropped by 29%, a percentage that does not replace the accumulated high of the previous four years.

The strong external pressure has eased, and commodity prices in Brazilian fields have also retreated. Current levels, however, are still much higher than those of four years ago, inhibiting further declines.

Consumers are paying 9% less for beef this year than they did in December 2022. In the previous four years, however, prices had risen 67%. Brazil reached record exports, and the price of an arroba of fat cattle, which was R$ 146 in mid-2018, reached R$ 350 in March last year. Even with the drop, the current values ​​of the arroba are R$ 238 in the field.

Pork and chicken followed the beef line on the table. External demand for these proteins has increased, coming mainly from China, a country affected by diseases in animal husbandry, such as swine fever and avian flu. Prices rose in Brazil and, on average, remain high, even after this year’s setbacks.

Chicken meat still accumulates a high of 51% in the last four and a half years in the domestic market, and pork, 61%. Basic foodstuffs, such as rice and beans, are also on the list of products that, even with the current accommodation of prices, remain expensive.

Rice, in addition to losing space in the cultivated area, had the internal market drained by exports, due to the high dollar and attractive external prices.

Beans, despite not having foreign competition, also lost ground to soy and corn. As a result, current consumer prices are still 92% higher than at the end of 2018.

In some cases, such as wheat, even with soaring foreign prices, record production somewhat inhibits increases. With the conflict between Russians and Ukrainians, a ton of wheat reached R$ 2,200 in the domestic market.

The record production of 10.5 million tons made the price drop to R$ 1,300 this month. Even so, the bun, due to the high of 2022, costs 42% more for consumers than in 2018.

This year was a period of record harvest in Brazil, and the same is expected for 2024, which helps in the fall of prices in the field. The drop in retail, however, occurs more slowly.