Jim Power: Food inflation is here to stay and big issues can no longer be ignored

There are growing indications that we are set to see a significant rise in food prices over the coming months.

The totally unacceptable, savage, and horrific Russian invasion of Ukraine has thrown away any notion that normality will return to our lives in 2022. 

It is impossible to be even remotely confident about how long this war will last or what Russia's ultimate aims really are, but we can be pretty sure the economic impact will be significant.

The three countries that are central to the war Russia, Ukraine, and Belarus — are between them significant producers of oil, coal, gas, potash, industrial metals such as palladium, nickel, copper and aluminium, wheat and sunflowers. 

Russia is the world’s number one exporter of natural gas and Germany imports 55% of its natural gas needs from Russia. Russia is the second largest exporter of oil and the third largest exporter of coal. Between them, Russia and Ukraine account for 29% of the global sales of wheat.

The production and distribution of all of these commodities are being affected to varying degrees and there is potential for a lot more disruption. This is feeding through to significantly higher energy costs for households and businesses; to significant potential disruption of batteries for electrical cars; to food production and food prices. 

In overall terms, it is a pretty tangled web that Russian president Vladimir Putin has woven.

Ireland, of course, will be significantly affected by all of these war-related issues. We have seen price hikes at the fuel pumps and in surging home heating oil bills in recent weeks.

Bord Gáis Energy this week said the average electricity bill would increase by 27% and the average gas bill by 39%. 

These energy price rises are coming on top of many other price rises and we can be certain considerable spending power will be taken out of the economy over the coming months. 

It is worth emphasising again that there can be no certainty about how much worse the situation will get, because we have no idea how much worse the war will get. 

However, even if the war were to end in the morning, the disruption to many diverse supply chains would take some time to work through. 

What happens to food prices and food supply will be particularly interesting over the coming months. 

I was recently party to a discussion by a group of British farmers, who were expressing fears that Britain faces a future existential threat because of an inability to feed its own people. It is estimated Britain currently produces about half of the food it consumes. 

One can never over-exaggerate the stupidity of Brexit.

Ireland is much less dependent on imported food, but pressures are building here also and there are growing indications that we are set to see a significant rise in food prices over the coming months.

The latest inflation data from the CSO suggests average food prices increased at an annual rate of 2.9% in February, still well below the average increase in consumer prices, and the rate of increase in energy-related areas and private rents. 

However, it still marks the highest annual increase in food prices since December 2008. Indeed, in the 10 years to February, average food prices declined by 8.5%, while average consumer prices increased by 8.5%.

Agricultural input data published this week showed all of the input costs for food production were rising at an alarming rate.  

In January, the agricultural output price index increased at an annual rate of almost 17% and the input price index increased by 26.4%. Fertiliser costs increased by more than 127% and motor fuels increased by 36.8%. The price of wheat has also soared.

One way or another, it appears food price inflation is set to become a thing over the coming months. However, once we see a return to some semblance of normality, we really do need to have a debate about food security and food production. 

Food discounters cannot be allowed run our food production into the ground, and the possibility of a ban on below-cost selling to protect food security will have to be debated. A cheap food policy can not be allowed to persist.