Food shortages mean expensive agricultural raw materials

First, the good news: Overall food price increases have slowed. However, some prices have continued to rise, such as juices or bread, and others have fallen drastically, such as butter or milk.

Consumer behavior can contribute to price regulation, says Volker Wieland, an economist at the University of Frankfurt: “YesDrinking water instead of milk or juice isn’t as fun anymore, that’s a reaction. But if in general we realize that our incomes no longer have the same purchasing power, that naturally puts pressure on the consumer climate.” Consequently, companies felt less demand. “This helps slow or stop the increase in prices”.

The power of speculators

So that is the power of the small consumer. But there are greater powers. Economists estimate that speculators have up to a 30 percent stake in the commodities market and consequently drive up prices. Crises and wars make making money especially easy. Food prices rose especially with the start of the Russian attack on Ukraine.

A study at the time showed that ten hedge funds made $1.9 billion in the first quarter of 2022 with bets on wheat and soybean prices, something that the UN special rapporteur, Olivier de Schutter, harshly criticized in his moment: “These hedge funds are parasites and problematic for their stability. There are climatic phenomena, there are fewer good quality crops, but financial speculation makes this worse.”

Droughts, rains and poor harvests make the situation worse

“It’s not that bad,” he said this morning. Economic update in AIO Information24 Ali Marsawah of Envestor. Nature plays a bigger role: “There were periods of drought and poor harvests, and that drove up prices much higher than the evil speculators.”

Adding agricultural commodities, for example, to an investment portfolio can also be interesting for small investors. According to Marsawah, they could also help offset losses in classics such as stocks or bonds: “Commodities are good instruments to diversify a portfolio. Of course, you have to want it, you have to be aware that you are not the bad guy.” “This is when prices rise in developing countries, but any existing trends are reinforced.”

Wars and crises intensify Price fluctuations

Current wars and crises also contribute to price fluctuations. You can almost no longer find oranges from Israel on the shelves of German supermarkets and the increase in energy costs since the start of the war in Ukraine has made food transportation considerably more expensive.

Energy prices have fallen; In the long term, food prices would also have to fall, says economist Wieland: “We will see if that happens, but it is only one factor. The decisive factor remains, of course, that many foods have become scarcer, especially due to the war in Ukraine.”

Of course, high food prices are not a German phenomenon. In many European countries they are significantly higher. For example in Finland, Norway, Denmark and especially in Switzerland. Germany occupies a middle place in European food price statistics.