According to Stuart Ashworth, head of economic services at QMS (Quality Meat Scotland - the red meat industry's promotional body), the current debate over farm-gate prices draws out a bigger discussion on whether consumers value food fairly and whether fluctuations in farm-gate prices are reflected in retail price movements. He reckons the latest update of consumer price information published by the Office of National Statistics (ONS) provides some insights.
These official statistics reveal that food represents around 10 per cent of total consumer spending and meat around 23 per cent of food spending. Indeed, the datasets suggest that consumers spend as much on out-of-home eating as they do in-the-home, with 10 per cent of all consumer spending being spent in restaurants, cafes and canteens.
Across the EU as a whole, food represents around 14 per cent of consumer spending with Romania having the highest spend at 29 per cent and the UK the second lowest spend with Luxembourg the lowest. Food consumed in the home accounts for around 9 per cent of consumer spending in the US and 20 per cent in Japan.
Mr Ashworth commented: "Compared to twenty years ago the importance of food spending has fallen from around 13 per cent of all spending to 10 per cent. Europe similarly has seen food spend as a proportion of total consumer spend fall over the past two decades by three percentage points. This does not necessarily mean consumers are spending less cash on food, it is just that as a proportion of available cash they are spending less on food. This can be achieved by buying less food, by price movements on food not being as rapid as price movements on other consumables, or by wages rising at a faster rate than food prices allowing more surplus cash to be spent on other items, or as a combination of all these things."
In the most recent ONS consumer price release, the retail price of meat has fallen 2.6 per cent over the year to July 2015 and is unchanged between June and July. Meanwhile the general level of inflation is broadly unchanged on the year resulting in food becoming less expensive in relative terms and allowing people to spend less of their total income on food and still buy the same volumes of food. Within the overall food spend, beef is 1.6 per cent cheaper than a year ago, while pork is 2.8 per cent cheaper, bacon 2 per cent cheaper and poultry 6.7 per cent - only lamb is reported to have increased in price at retail level.
Mr Ashworth points out: "Producers will quickly notice that these retail price movements bear little resemblance to producer price movements which in July saw cattle prices 7.5 per cent higher than a year earlier, while lamb and pig prices were 17 per cent lower.
"This illustrates the challenge of a consumer-facing retailer who is striving to manage consumer expectation - among which volatility in price is not something the consumer likes. Consumers may be happy to take rapid falls in retail price, they are less likely though to accept rapid increases in price, preferring instead to adjust the volume of product they purchase, switching to more competitive proteins, or in some extreme cases resorting to political unrest.
"Thus, the slow pace of retail price movements may shelter a consumer from rising farm-gate prices, but equally it slows the response to farm-gate price falls."
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