- Experts unanimously expect the general upward trend in the prices of the most frequently purchased food, chemical and baby products to continue.
- This is the result of a recently published report entitled "Retail Store Price Index".
- However, the situation may vary within individual categories.
– In the perspective of the second half of the holidays, I would not expect major price changes in stores. However, in the period from September to October, we can expect further, slow but systematic price increases to an average level of approx. 5% y/y. It is getting closer. According to the latest report, in July this year, prices in stores increased by an average of 3.9% y/y, after jumps of 3.1% in June and 2.9% in May – assesses Dr. Tomasz Kopyściański from WSB Merito University.
Dr. Piotr Arak, chief economist at VeloBank, believes that we should see price dynamics rising during the summer, and then in September and October. Month-to-month differences may be small, but they will remain around 4%. Additionally, Poland is experiencing drought, which has unfortunately become an almost annual phenomenon due to climate change.
Prices of flour, bread and animal feed
We expect its effects to affect prices, especially in September and October, when vegetables and fruits from this year's harvest will hit the market. Additionally, food prices are rising worldwide, and concerns about grain harvests in Europe are leading to price increases. As a result, this could affect the growth of flour, bread, and animal feed prices, which in turn will affect meat prices – notes the expert from VeloBank.
Marcin Luziński from Santander Bank Polska, on the other hand, predicts that the annual price dynamics will continue to accelerate. However, in his opinion, the growth will not be as strong as during the period of high inflation in 2021-2022. The expert assumes that we may see growth in the range of 0.5 percentage points every month, so in September or October we may exceed the level of 5%. In addition, Robert Biegaj from the Offerista Group claims that retailers will probably want to recoup costs incurred for a long time right after the holidays, and then customers will face an additional price shock. He also adds that consumers should be prepared for a post-holiday increase exceeding 4-5% y/y. And this is a rather optimistic scenario that will come true if nothing new shakes up the market.
Chocolate and oil prices up
A strong increase in the prices of chocolate and oils should be expected. Domestic fruit will enter the market towards the end of the holidays. Estimates indicate a 10% drop in production. A growth impulse will then appear. The drought did not harm vegetables too much and this year's harvest will be better than last year's, so they should not go up so much. Meat prices may increase slower than other products, especially pork, because its supply has increased significantly recently – estimates Marcin Luziński.
What about vegetable prices?
Dr. Mariusz Dziwulski from PKO BP also expects the low annual dynamics of vegetable prices to continue, possibly negatively. In his opinion, everything points to a higher supply this year, both domestically and on foreign markets. According to the preliminary estimate of the Central Statistical Office, this year's harvest of field vegetables may be higher by 2% year-on-year.
The lower prices of vegetables under cover in recent months are noteworthy. Higher tomato production in Spain and the Netherlands, which recovered from declines caused by high energy costs in 2022-2023, has a negative impact on the domestic market. Lower prices, also due to higher supply in the EU, are recorded on the pepper market – adds Dr. Dziwulski.
Fat products should continue to fall in price. One of the factors influencing the decline in their prices is the export of raw materials from Ukraine. As Robert Biegaj adds, 57.5 million tons of grains and oilseeds were exported in the 2023/2024 season. This was a volume similar to last year's, much better than initial forecasts.
The production of cereals and oilseeds amounted to 82.8 million tons and was a dozen or so percent higher than in the previous season. A potential increase in rapeseed prices, resulting from lower acreage, among others in the EU, may lead to a slowdown in the decline in prices of fat products – predicts Michał Bieńkowski, Senior Analyst of the Food and Agri Sector at Bank BNP Paribas.
Forecasted grain harvest in Poland
The expert notes that it was similar with cereal products, as wheat prices on the stock exchanges fell in the first half of the year. In late spring, prices rebounded due to concerns about this year's wheat production potential in France, which may be the lowest in decades. In Poland, the harvest of winter cereals is coming to an end, and the spring harvest is at an advanced stage.
The total forecasted harvest of basic cereals in Poland may be lower by approx. 4% year-on-year. However, Polish wheat prices depend to a large extent on the formation of quotations of these cereals on the international market. In the current season, we expect significant declines in wheat harvests in France, Germany, Ukraine and Russia, which may counteract further price drops – adds Michał Bieńkowski.
However, as Dr. Tomasz Kopyściański from WSB Merito University claims, in the long term, price increases in stores will be affected by the risks of energy carrier fees and another increase in the minimum wage from January 2025. Therefore, consumers will rather come into contact with categories whose prices will increase. And even the effect of a price war on the market will not be enough. In turn, the expert from the Offerista Group adds that the aforementioned price war is still effectively "cutting" prices, but it will probably not last long. It should crumble, because these activities have simply lost their freshness and dynamics. In addition, reducing margins in the long run does not make business sense. And every war costs money and brings losses. This can be seen in the recent financial results of one of the main discount stores in Poland.
The scenario is gradually being realized, in which the margin reserve used for the price war of discount stores allows for the reconstruction of results. After July, consumers will be accustomed to accepting higher levels of price increases, because energy has become more expensive – adds Dr. Piotr Arak.
As a result, most categories will become more expensive. According to expert predictions, this will affect both the aforementioned sweets and desserts, which have been increasing in price significantly in recent months, as well as other categories, including household chemicals and – according to the latest edition of the aforementioned report – non-alcoholic beverages.
– Firstly, it is influenced by demand. It is hot and drinks are in demand. Secondly, the costs of components, e.g. fruit and syrups, concentrates, have increased. Sugar is not cheap either, and it is also taxed in drinks. There is no indication that – even if only because of the cost of labour in agriculture and in the processing industry itself – prices and costs will fall. It is expensive, and it may become even more expensive – admits Dr. Andrzej Maria Faliński from the Economic Dialogue Forum Association.
In addition, Prof. Sławomir Jankiewicz from WSB Merito University notes that the increase in beverage prices is due to several factors. First, it is the increase in production costs (including energy and wages) and raw materials. Second, it is necessary to take into account issues related to environmental protection and sustainable development (e.g. reducing the harmfulness of production, ecological packaging).
– In the case of sweets, there are also indications of growth. Irregular rainfall and high temperature variability will cause reduced yields per hectare and their poorer quality. Additionally, systematically increasing obesity in society and the search for opportunities to increase budget revenues may result in an increase in additional fees for raw materials used in production or directly for sweets. As a result, sweet prices may increase significantly – assesses the expert from WSB University Merito.
Bread prices will go up
In his opinion, bread will also become more expensive, as its prices are determined by gas and energy costs. The elimination of shields and the increase in the prices of the aforementioned raw materials in the following months of this year will increase production costs. Another factor influencing this is the increase in fuel prices, which contributes to the increase in transport costs. The industry has also felt the change in VAT, and this indirectly affects bread prices.
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Purchase prices for cereals, rapeseed and legumes as of August 29, 2024
Employment costs are also a problem. The increase in the average wage and the minimum wage translates into the need to increase wages in bakeries, which increases costs. Prices on the grain market also affect this type of business. Unfortunately, they cannot use the technical grain available on the market because it does not meet quality standards, although the previous government consciously allowed it for human and animal consumption, despite the objections of specialists – points out Prof. Jankiewicz.
Robert Biegaj, in turn, points out another factor. If consumption grows along with the shopping moods of Poles, then retail chains will additionally increase prices. They will want to make money at the same time, but also to recoup the previous weaker periods. Therefore, prices in stores will definitely go up. And in December, this could end up with an increase of even 6-7% y/y. It cannot be ruled out that this will be an even bigger jump.
In 2025, we may see a further increase in inflation, i.e. even in the range of 7-10%. This will be caused by, among others, an increase in the prices of energy, gas, fuels and services, an increase in distribution fees and an increase in district heating – sums up Prof. Jankiewicz.
Source: MondayNews
