Stratospheric food prices send shoppers scurrying for options

Food inflation is as extreme as it has been in living memory. It’s the perfect price storm – influenced by supply chain issues, elevated freight costs and extreme weather events. There is hope that the peak has passed, but supermarket chief executives are cautious with their predictions.

In November, the Reserve Bank called out grocery inflation at 9 per cent – the highest since 1983. In the three months from September to December, both large supermarket chains Coles and Woolworths clocked food inflation rising to 7.7 per cent.

While higher food prices have fed into robust sales revenue for the major supermarket chains, for the average four-member household, it’s an exercise in navigating the supermarket aisles to find value.

Supermarket executives will attest that there is rarely a time when all categories of food are experiencing inflation. But at the end of the last year, too much rain in some areas, not enough in others and hothouses starved of sunshine played havoc with fresh produce supplies. Meanwhile, supply chain issues accounted for disproportionate price rises in packed goods as manufacturers sought to cover their own cost pressures by passing them on to the supermarkets.

The good news is that both the heads of Coles and Woolworths are predicting that peak food inflation may have passed. The bad news is that this doesn’t necessarily mean prices will come down – it just means they won’t rise at the same rate.

They note that the extreme freight costs experienced last year have started to ease, and the cost of some vegetables is actually coming down thanks to improved growing conditions.

Asked about his confidence in predicting food inflation had peaked, Woolworths chief executive Brad Banducci said “confident” was not a word easily used in the past three years.

“Hopeful” is probably more appropriate.