Czech farmers experienced a significant drop in prices in May, marking the first year-on-year decline in 26 months. This reduction in prices has led analysts to speculate that food prices may follow suit. The prices of plant-based products plummeted by nearly a quarter, with oils experiencing a 33% drop and cereals witnessing a decline of around 25%. Eggs also dipped by 10%, while grains, potatoes, and milk saw decreases of 6%, 10%, and 5%, respectively.

The price cuts can be attributed, in part, to a decrease in consumer demand. Petr Havel, an agricultural analyst, noted that in order to sell their existing production volumes, farmers had to lower prices. May was the first month in which cost reductions and reduced customer purchases had a significant impact.

Since January, agricultural first producers have already reduced their prices by 14%. Martin Gürtler, an analyst from Komerční banka, believes that this reduction should serve as a catalyst for a sustained drop in food prices for end consumers. However, prices rebounded in May after experiencing a decline in April.

Certain food products have witnessed price increases compared to the previous year. Fresh vegetable prices rose by 20%, while potato prices surged by over 16%. In the animal products category, prices rose by 11%, with eggs increasing by 40%, pork by 20%, poultry by 14%, and milk by 7.5%.

The prices of animal products did not decrease due to farmers purchasing feed during a costly period, which they will use for milking cows until autumn. Martin Pýcha, Chairman of the Czech Agricultural Union, explained that the pork sector had endured low prices for three years and is currently in the process of recovering.

Pýcha predicts that potato prices will decrease in a few weeks as imported potatoes, which are more expensive than last year’s harvest, are being sold in stores. When domestic produce hits the market, prices are expected to drop. A similar trend is expected for potatoes.

The impact on bread prices remains uncertain as its production is energy-intensive. Pýcha cautioned that bakers have not yet reflected all costs in their prices. Although the average price of wheat fell below CZK 6,000 in May, compared to CZK 8,325 in May of the previous year, this reduction may not be fully reflected in bread prices. Pýcha explained that the proportion of grain in the price of bread may only be one or two crowns, while the overall price has risen by more than ten crowns.

In May, industrial producer prices experienced a decline of 0.8%, yet they remained 3.6% higher year-on-year. However, the rate of increase has slowed down, indicating a potential shift in the overall price trend.

Article by Prague Forum