Prague, Czech Republic, October 26, 2023 – In recent months, the Czech Republic has witnessed a substantial decrease in the prices of agricultural products, while the cost of groceries in stores has not reflected these reductions. The Agrarian Chamber has brought attention to this disparity, revealing a pressing issue within the food supply chain. Despite a notable drop of 13.4% year-on-year in September and 16.4% in August in agricultural producers’ prices, the prices of food in stores have instead risen by 6% during the same period.

The statistics highlight that the high prices of groceries in stores cannot be solely attributed to farmers, as emphasized by the Agrarian Chamber. Multiple factors contribute to the costs of grocery items, including the expenses and markups imposed by food producers, transportation costs, storage expenditures, and significantly, the costs and markups implemented by retail chains.

Jan Doležal, President of the Agrarian Chamber, clarified that while Czech farmers have been reducing prices, their influence on the prices of groceries on store shelves is limited. He pointed to the crucial role played by various factors, asserting, “In addition to the farmers’ prices, other factors such as the costs and markups of food producers, transportation costs, storage costs, and, above all, the costs and markups of retail chains play a significant role.”

Tomáš Prouza, President of the Confederation of Trade and Tourism, defended the stores and their pricing policies. He contended that the prices of agricultural commodities are not decreasing uniformly and that Czech food producers need to adjust their pricing practices to reflect the lower costs, rather than artificially maintaining high prices. Prouza emphasized the importance of remaining competitive with foreign suppliers who more readily adapt to lower input costs.

Hana Kavanová, spokesperson for the Food Chamber, refuted Prouza’s stance. She cited the example of milk and dairy product manufacturers who had reduced their prices in line with falling milk prices at the primary producer level, but these reductions were not promptly passed on to consumers.

Kavanová pointed to a concerning discrepancy, noting that in several instances, manufacturers’ average production costs had surged by 50%, while the supplier price only increased by 25%. This discrepancy, she argued, underscored that the prices of groceries are largely dictated by traders who maintain substantial markups, in some cases up to 100%, for various Czech products.

Despite the reduction in the prices of agricultural raw materials, food producers face ongoing challenges due to rising costs in energy, fuel, packaging, and growing labor expenses. Agrarian analyst Petr Havel explained that the prices of agricultural raw materials contribute only partially to the final price of groceries. He clarified that if raw material prices drop but energy and labor expenses do not, it logically follows that the price reductions in stores will be less significant.

The issue of high grocery prices remains multifaceted, highlighting the interplay between various stakeholders along the supply chain, making it a complex challenge to address.

Article by Prague Forum