Czech Farmers Cutting Prices: And What It Means for Food?

Czech farmers cut their prices by over a tenth in May, the first year-on-year drop in 26 months. According to analysts, this decrease means food prices could also start falling.

The prices of plant-based products dropped by almost a quarter, with a third off oils and nearly a quarter off cereals. Eggs were down by one-tenth, with a six percent drop in grains and potatoes, and milk was down five percent.

The cuts are partly a reaction to reduced consumer demand. As Petr Havel, an agricultural analyst, explained, “When you have certain production volumes, and you need to sell them, you have to lower the price.” He added that May is the first month where cost reductions and fewer customer purchases have a significant effect.

Agricultural first producers have already lowered their prices by 14 percent since January. Analyst Martin Gürtler from Komerční banka believes this should be an impetus for a sustained drop in food prices for end consumers. However, prices rose again in May after falling in April.

Some food products have still increased in price year-on-year. The cost of fresh vegetables rose by one-fifth, and potatoes by more than 16 percent. In animal products, prices rose by 11 percent. Eggs increased by two-fifths, pork by one-fifth, poultry by 14 percent, and milk by 7.5 percent.

Prices of animal products had not fallen because farmers bought feed when it was costly. They will use it for milking cows until autumn. “Pork is specific in that the price was meager for three years, and the sector is now recovering from that,” said Martin Pýcha, Chairman of the Czech Agricultural Union.

According to Pýcha, potato prices will drop in a few weeks. “Imported potatoes are starting to be sold in stores, which are more expensive than last year’s harvest. When domestic produce comes on the market, prices will drop. The same will happen with potatoes in weeks,” he explained.

The question is how the bread prices will be affected, as its production is energy-intensive. “Bakers have announced that they have not yet reflected all costs in prices,” warned Pýcha.

Although the average price of wheat fell below CZK 6,000 for the first time in May, when it stood at CZK 8,325 in May last year, this may not be so reflected in the price of bread. “The proportion of grain in the price of bread may be one or two crowns, but the price has also risen by more than ten crowns,” added Pýcha.

Industrial producer prices fell by 0.8 percent in May but were still higher year-on-year by 3.6 percent. However, the increase has slowed down.