The price of groceries has increased considerably for the past few months, but it is expected to rise substantially at the beginning of next year. The reason is higher price of food ingredients, which has not yet affected the price of finished products fully.
“A rapid increase of food prices is imminent,” Marteinn Magnússon, marketing director for the wholesale Eggert Kristjánsson hf. told Morgunbladid. “The increase of food prices that we have experienced so far is only part of what is yet to come.”
There are many reasons for higher price of food ingredients including crop failure in wheat production around the world, increased competition for cornfields, progressive increase of oil prices and more demand for food ingredients. At the same time more people demand green farming which means less production capability for each farm.
The price of energy is increasing in many countries overseas, which affects the price of transport and food wrappings. “This happens asynchronously and each factor affects the other,” Magnússon said.
Magnússon predicted some of these factors, like the volume and quality of crops, would improve next year and food prices would drop again slightly, “but I think many of these higher prices have come to stay. […] This is the cold reality.”
Despite the lowering of the value added tax (VAT) in Iceland in March this year, the price of flour has increased by 5.4 percent since January 1, 2007, and the price of pasta by 8.4 percent.