Cheaper veges bring food prices down

22:51, Nov 12 2012

Vegetables including salad greens and broccoli are getting cheaper, as they usually do in spring, but some grocery foods are rising in price.

The price of salad vegetables such as lettuce, tomatoes and capsicums fell by almost a third as warmer weather arrived last month.

Overall, food prices fell 0.6 per cent in October Statistics New Zealand said. That reflects seasonally lower prices for vegetables, partly countered by higher grocery food prices. Annual food prices were up just 0.3 per cent.

Falling food prices in the past year have been a factor in keeping overall inflation low this year.

Food prices have come back in the past 12 months in part because of lower world prices for dairy and meat, and a drop from the spike in fruit and vegetable prices last year because of bad weather, ASB economist Jane Turner said.

Food prices were expected to rise “modestly” in the coming year and add to overall inflation, and dairy and meat prices may rise next year because of high world prices after drought in the United States.

In October, two of the five food subgroups contributed to the fall in the food price index with fruit and vegetables down 5.5 per cent and restaurant meals and ready-to-eat food down 0.5 per cent.

"Lower food prices in October mainly reflected cheaper vegetables," prices manager Chris Pike said. "Tomato, lettuce, capsicum, and broccoli prices all fell, as they usually do at this time of year."

The key individual fall in October came from seasonally lower prices for tomatoes (down 32 per cent). Prices were also lower for lettuce (down 27 per cent), chocolate biscuits (down 10 per cent) as a result of more discounting, and capsicum (down 26 percent).

Prices were higher for soft drinks, carrots,and plain biscuits as September discounts ended. Carrot prices were up 29 per cent in the month - an unusual rise at this time of year.

Grocery prices were up 0.5 per cent in October, after falling steadily in the past six months. Prices had been falling recently because of lower dairy product prices, as world prices fell back ASB Bank economists said. But further prices drops for dairy products were expected to be limited at the shops, ASB said.

Global dairy prices have steadied because of the drought in the US and ASB said there was “potential” for a recovery in world dairy prices in the year ahead, which could be passed on in the shops to “a limited extent” in 2013.

For the year to October 2012, food prices increased 0.3 per cent. Fruit and vegetables were up 8.4 per cent in the year, restaurant meals and ready-to-eat food rose 0.8 per cent, while meat, poultry, and fish were also up 0.8 per cent. The increases were countered by a 2.7 per cent fall in grocery food prices.

The key annual increases for the year were tomatoes (up 61 per cent, from $5.15 to $8.29 per kilogram) and kumara (up 93 per cent). Prices were up sharply for kumara because the crop was hit by bad weather both during planting and harvesting.

Higher prices were also recorded for avocados, pumpkin, soft drinks, and chicken pieces. Avocado prices were up because of a bumper harvest the year before when prices were low because of the plentiful supply. There tends to be a smaller crop every second year.

The key annual decreases were fresh milk (down 9.5 per cent) and butter (down 28 per cent).