A new wave of price increases for basic food products is expected in the coming weeks, as rising grain and flour costs gradually make their way to consumers. Bread, bakery products, pasta and other everyday staples are at the centre of the pressure at a time when households continue to face a high cost of living.
Market sources told Politis that grain prices have risen by around 25% to 30% since the beginning of the year, mainly due to the continuing war in Ukraine and broader disruption in international food markets.
At the same time, the cost of grain shipments has risen by 71% over the past year, significantly increasing import and production costs.
Producers running out of room to absorb costs
The same sources said the increases have now exhausted the ability of producers and suppliers to absorb higher costs.
Until now, a significant share of these additional expenses had been absorbed across the supply chain in an effort to limit the impact on retail prices. However, the prolonged increase in raw material prices, combined with higher transport, energy and cargo insurance costs, has made this increasingly difficult.
Price rises are expected to appear gradually on supermarket and food shop shelves, beginning with flour and subsequently affecting products for which grain is a key raw material.
According to market estimates, bread and bakery products could see price increases of around 10% or more, levels which have already been recorded in other European markets.
Oil prices add further pressure
The already difficult environment has been compounded by a fresh rise in oil prices due to the conflict in the Middle East.
Yesterday, crude oil traded above $100 a barrel, at around $105, increasing concerns over further rises in transport and production costs.
In Cyprus, fuel prices are now approaching the record levels recorded in July 2022. Unleaded 95 petrol is selling for as much as €1.718 per litre, while diesel has reached €1.989 per litre.
The Cyprus Consumers Association has expressed concern over the continuing upward trend, noting that current prices are only 9 to 10 cents below the historic highs of 2022.
Despite the extension of the reduction in excise duty, the benefit for consumers is limited to around 8.3 cents per litre.
Central Bank expects pressures to ease
Developments in food and fuel prices are also expected to affect broader inflationary pressures in the economy.
However, Central Bank of Cyprus Governor Christodoulos Patsalides remains cautiously optimistic about the outlook for the Cypriot economy. He has said that, despite geopolitical uncertainty, the economy remains resilient and inflationary pressures are expected to ease next year.
“The Cypriot economy continues to demonstrate resilience despite heightened geopolitical uncertainty, supported mainly by the strength of the services sector, robust private consumption, a strong labour market and sound public finances,” Patsalides said, commenting on the European Central Bank’s decision to raise interest rates by 25 basis points.
Patsalides, a member of the ECB Governing Council, described the decision as necessary.
“The ECB Governing Council decided to increase its key interest rates by 0.25 percentage points, assessing that the effects of the energy shock and the prolonged conflict in the Middle East continue to keep inflationary pressures at elevated levels.”
