When are we going to see a drop in Irish food prices?

A food economist talks about what's happening with food prices in Ireland right now and when we'll see some change at the checkout

General inflation is currently at 6% in Ireland. According to the CSO, food inflation is double that at close to 13%, while consultants Kantar say food inflation is over 16.6%. But Taoiseach Leo Varadkar has told the Dáil that the Competition and Consumer Protection Commission (CCPC) has cautioned strongly against introducing price controls on goods.

Sinn Féin leader Mary Lou McDonald questioned the Taoiseach about when prices would drop for consumers, saying we need "enforcement" and that retail industry has to be "held to account". The Taoiseach said the Retail Forum would be getting a "very clear message" on behalf from the Government: "when your input costs went up, you increased your prices. Now your input costs are going down, we expect to see you reduce your prices."

Prof Thia Hennessy is Head of School and Chair of Agri-Food Economics at Cork University Business School at UCC and she joined Bryan Dobson on RTÉ Radio 1's News At One to talk about what's happening with consumer prices in Ireland right now and when we might start to feel the falling prices at the checkout. (This piece includes excerpts from the conversation which have been edited for length and clarity - you can hear the discussion in full above).

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From RTÉ Radio 1's Today with Claire Byrne, Irish Mirror Political Correspondent Louise Burne on the retail forum and concerns over food pricing

Why have food prices been so high?

"Everybody sees it at the till when they're doing their weekly shop, that the prices have gone up astronomically over the last couple of years, due to a number of factors: related to Covid, climate change most especially the war in the Ukraine," explains Hennessy. "But as you say, commodity prices have been coming down over the last six months: energy costs, cereals, dairy products." Prices have been much slower to come down that everybody expected, she says, adding that "it's a global phenomenon, it's not just in Ireland. In fact our rate of inflation in Ireland has been lower than the EU average, so we're not unique in terms of grappling with this problem."

If commodity prices are coming down, why aren't consumers feeling it at the checkout?

"First of all, the price increases were slower to come through to consumers, as well. What the food industry leaders will tell you, and I'm sure what they will be saying today in the retail forum, is that as their costs of production went up over the last 12 to 18 months, they sustained as much of those losses as they could, and they were slow to pass prices through to the consumer. The evidence is there to support that with the data," says Hennessy.

What about farmers who say their products are getting a lower price?

"We're seeing a squeezing at both ends of the chain, actually. So it really does beg the question: who's making money out of all of this?" says Hennessy. "What we've seen at the farm-level, is the cost of producing the raw materials of food products have increased dramatically over the last number of years, particularly fertiliser and energy prices.

"And then prices received by farmers, especially dairy farmers, have increased substantially as well. Now they have fallen over the last number of months and we're starting to see that as consumers, as well. A number of retailers over the last week or two have announced reductions in the price of butter and milk for the consumer, which I think is following through from the reduced prices for farmers."

From RTÉ Radio 1's Morning Ireland, Tesco announces cut in the price of its own-brand butter

"There's a lot of competitive forces at play," says Hennessy, so it makes sense to see own brand products be the first to go down in price, such as what we've seen with Tesco." Tesco has announced a 40c reduction in the price of it's own-brand butter. "I think that retailers have greater control over their own branded products, that they may reduce those first to give themselves a competitive advantage. But you could be cynical about it, when you see all of the retailers moving together over the last couple of weeks, in terms of dairy prices, and I think this will be an issue for discussion at the forum as well today."

There is a "first mover advantage for the first retailer that reduces the price" but then we largely see other retailers following suit quite quickly, says Hennessy. "What I would say about the food retail sector in Ireland is that it's not very concentrated compared to other countries no one company dominates the largest company only has about 20% of the market and that's a really positive thing for consumers.

Is there a case for price controls?

There could be a case for it, but the Taoiseach made very valid points in terms of the risks of a knock-on effect on products that are uncontrolled, says Hennessy. It's been looked at right across Europe and Hungary is the only country that has taken that measure for seven key, staple products that they are limiting the price of, she says.

From RTÉ Radio 1's Morning Ireland, why have food prices remained high despite falling inflation?

"But there is the risk that it's pushed on to other products. Yes, we're an exporter of raw materials from Ireland, such as dairy and beef products, but we are a net importer of many branded consumer items and we're a small player in the global market. So we really have to think very carefully about what the implications of that would be."

When will we see falling prices reflected in grocery prices?

"We were all surprised that it's been as slow as it has been - we would have predicted that it would have happened much faster than this. Whether these 'soft measures' in terms of political interventions expedite that, I think that would be very positive. But certainly in the last week we've seen the dairy prices coming down, you've mentioned the bread prices, so that's how you start to see the gradual reduction."

"Another thing I would add, is while a lot of this is short term cycles, in terms of the impact of the war in the Ukraine, we are moving to a new normal in terms of food production. Because of the way the climate changing, because of the way the policy environment is changing - it's really limiting the productive capacity of producers, of farmers, and we may be moving to a situation where in general food prices will be higher than they have been before."