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Spain Food and Drink Report Q2 2008Published by: Business Monitor International Published: Apr. 24, 2008 - 78 Pages Table of Contents
AbstractFood price inflation in Spain is currently the highest in the Eurozone; according to Eurostat figures,between 2005 and February 2008 food prices leapt by 13%. In addition, the latest Agriculture Ministryestimates suggest that in the 12 months to February 2008, milk prices rose by 24% and chicken prices by16%. Spanish consumers spend a fairly large percentage of their income on food and therefore food has aheavier weighting in the country’s overall measure of inflation than in most other Eurozone countries.This fact has helped push the country’s official inflation rate close to 4.4% - the highest level for tenyears and well above the European Central Bank’s (ECB) target of 2%.Spain is particularly vulnerable to rising commodity prices because it is a net importer of grain. Spain’slack of grazing land means that many meat and dairy farmers have to rely on expensive animal feedproduced from grain. However, the Spanish climate means that local farmers cannot produce enoughgrain to fulfil domestic demand and the country therefore relies heavily on imports for both animal feedand food manufacture. In the coming year, this is likely to be exacerbated by 2007/2008 winter being thedriest in living memory. Much of the country’s farmland relies on irrigation from the national watersupply and if this is not replenished in the spring of 2008, this year’s harvests look likely to be very pooras meeting domestic water demand becomes the priority. The high price of grain has pushed up the retail price of meat, milk and bread but the financial results ofEbro Puleva, the country’s largest food firm, suggest that manufacturers are also bearing some of thebrunt of the cost increases. In February 2008 Ebro announced that despite a 9.4% increase in net sales thefirm’s profits for 2007 had slumped by 50%. When announcing its results the firm commented that risingcereal prices, including animal feed prices, were having a direct effect on the bottom line. This pattern islikely to be repeated across many of the country’s dairy and meat producers. In addition with the price ofmeat and dairy increasing so sharply consumption may soon start fall, particularly if the long predictedeconomic slowdown really starts to take hold. Despite financial results that suggest that many food producers are doing a lot to moderate the severity ofprice increases rising food prices have become an increasingly salient political issue. The Spanishconsumers’ Union, UCE, suggests that retailers are using rising commodity costs as an excuse to increasetheir margins and the strong results from many of the country’s retailers, including Carrefour, suggestthat the country’s retailers are certainly not being adversely affected by the situation. Get Full Details About This Report >> |
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