Get ready to pay more for food too, analysts warn
The giant chain Super-Sol, which is Israel's biggest retailer, is converting all its Super-Sol Big hypermarket stores into discount Super-Sol Deal branches; that should also have an impact on food prices in Israel this year.
Agricultural commodity prices have been soaring for months and inevitably, that means food prices in Israel will be climbing, warns Ayelet Nir, chief economist at the Tel Aviv-based brokerage IBI.
She and her analytical team found a strong correlation with a four-month delay between the CRB (the Commodity Research Bureau index that tracks global agricultural commodity prices ) and the index of Israeli food prices, which includes all foodstuffs except fresh fruit and vegetables.
Why does it exclude fresh produce, by the way? Because the price of fresh produce may be affected by seasonality, for instance, or weather, but not by the global market for agriculture commodities, explains Nir. The movement of wheat seeds isn't about to change the price in the market of tomatoes.
What degree of increase may we expect? During the last year, agricultural commodity prices shot up by a steep 53% compared with the year before, says Nir in her weekly review to investors. The last time commodity prices rose so sharply was in May 2008, when they increased by 54% year over year. Four months later, food prices in Israel increased by 13.4%.
Why was the increase in Israeli food prices so much less than the increase of commodity prices?
A host of reasons, Nir explains, one being exchange rates, another being the tooth-and-claw competition between Israel's retail chains. Nir and her team estimate that in the positive scenario that commodity prices stop rising, food prices will be increasing by 8% this year. But in the less-good scenario, commodity prices will keep rising. That in turn means food prices will increase by even more.
She also notes that the giant chain Super-Sol, which is Israel's biggest retailer, is converting all its Super-Sol Big hypermarket stores into discount Super-Sol Deal branches. That should also have an impact on food prices in Israel this year.