There has been some “further silver lining for consumers” with the latest monthly Consumer Price Index (CPI) data from the Australian Bureau of Statistics showing food price inflation has continued to moderate.
RaboResearch Senior Food Retail Analyst Michael Harvey says the November 2023 data showed prices for food and (non-alcoholic) beverages had risen 4.6% annually (from November 2022). However, this was down on the 5.3% rate of annual inflation in this category posted in October 2023, and well below the peak of annual food price inflation of 9.6% that was seen in September 2022.
Mr Harvey said red meat and fresh produce saw annual inflation of less than 1%, which “will be welcome news for Australian consumers as they are important categories in household budgets”.
“More sticky inflation was evident in key packaged food categories, such as dairy and bakery,” he said, “but the good news is there is less ‘sticker shock’ for consumers in these categories as well, with the rate of inflation also moderating and actually at the lowest level since mid 2022.”
Mr Harvey said Rabobank saw agricultural commodity prices broadly remaining range-bound at lower price levels through 2024, and this would be “welcomed by consumers as it has been a leading cause of higher food prices”.
However, he said, recent rainfall and flooding reinforce the risk to local food supply and prices from unfavourable impacts of adverse weather conditions, particularly across horticulture and fresh produce. “Unfavourable weather during key growing periods can affect quality and disrupt supply, leading to upward pressure on prices,” Mr Harvey said.
He said margins in the food supply chain were also improving “downstream’ for food companies on the back of weaker agricultural commodity prices and easing food processing and distribution costs.
“And with this, we are seeing a sharpened focus from food and beverage companies to tailor products to a value-conscious consumer. And this will be a key theme through 2024 as cost-of-living pressures continue to influence purchasing behaviour,” he said.
Mr Harvey said for agricultural commodity prices, there had, however, been “some outliers, such as cocoa and sugar”, which have remained higher for longer. “And this does keep pressure on certain processed foods such as chocolate,” he said.
“We will get a deeper dive look into the food basket when December quarter CPI results are released on January 31.”