Farmers Slashing Prices, Economists Urge Food Retailers to Follow Suit

In August, while the prices of most producers experienced a year-on-year increase, the agricultural sector continued its downward spiral with a significant 16.4% drop. This price decline of farming producers has been a consistent trend over the last four months, with acceleration each month – 10.2% in May, 13.8% in June, 14.3% in July, and a sharp 16.4% in August.

Plant production witnessed a staggering 26.2% year-on-year price decrease, and animal production faced a 2.4% dip. Edible oils and cereals reduced prices by approximately a third, while vegetables drastically increased, with potatoes soaring by almost 83%.

Leading economist at BHS, Štěpán Křeček, believes that food producers and retailers should reflect this decline in their prices. He stated, “Considering the steep fall in agricultural producer prices and the improving situation in energy markets, nothing stops grocery stores from reducing food prices. If food producers and retailers fail to do so, they will exploit their position at customers’ expense.”

Worldwide, food prices experienced a decline in August, except for rice, which reached its highest price in 15 years.

Similarly, Martin Kron, an analyst at Raiffeisenbank, interprets these numbers to suggest that food prices should continue contributing to lower inflation in the upcoming months. He adds, “If this doesn’t happen, then in the dispute over whether farmers, processors, or retailers are responsible for high food prices, farmers would be exempted from this question.”

Jakub Seidler, the Czech Banking Association’s chief economist, views the agricultural data positively and significantly because “the month-on-month decline exceeded the usual seasonality, which is particularly strong in plant production.”

There was a slight year-on-year rise in prices in the industrial sector, increasing from 1.4% in July to 1.8% in August. Prices rose significantly compared to the previous year for electricity, gas, steam, and air conditioning (almost 12%), coal and lignite (73%), and other non-metallic mineral products (by a tenth).

On the other hand, prices for coke and refined petroleum products, chemical substances and preparations, primary metals, and wood, wooden, and cork products decreased. Month-on-month, industrial producer prices increased by 0.2% after six months of continuous decline.

The year-on-year growth in construction work prices slowed down from 4.8% in July. Costs of materials and products used in construction were 0.2% higher in August. Month-on-month, construction prices increased by 0.1%, and expenses of materials and products used in construction decreased by 0.3%.

For businesses, market service prices were 5.3% higher year-on-year in August, slightly down from 5.6% in July. In August, employment service prices rose by 23%, and real estate services increased by 7%. Month-on-month, prices of market services for businesses increased by 0.6%, mainly due to a rise in advertising services and market research by 7%, as reported by statisticians.