Food price situation in Europe

Food prices in the EU have risen dramatically in 2022 and the first half of 2023. The drivers of this increase originated in energy cost increases, aggravated by the effects of drought and animal disease outbreaks, but high global market prices in part due to the Russian invasion of Ukraine after February 2022 also helped to pull food prices higher and may have facilitated some element of profit-led inflation. Households have responded by buying less and trading down, with an increasing number turning to food banks to help make ends meet. Some limited steps were taken at EU level to help protect consumers from the effects of higher prices, but the important interventions have been at Member State level. These measures have primarily been focused on energy prices, but several Member States in addition directly tackled food price inflation either by lowering VAT rates on food products, by introducing temporary price controls on a basket of basic food products, or by providing food vouchers. Given the lags in price transmission along the food chain, food prices are likely to remain high for several more months. Lower energy and commodity prices, together with higher interest rates, should be reflected in lower food prices in the second half of 2023, in the absence of further adverse shocks to the food system, but food prices will not return to pre-war levels.