Should Czechs worry about prices of food skyrocketing?

Prices of some basic foodstuffs in the Czech Republic have gone up by 20 to 30 percent since the beginning of the year due to the government’s fiscal reform, as well as the global food crisis and record-breaking costs of fuel. But Czech consumers may have to reach even deeper in their pockets in the near future to pay their grocery bills.

Jan Veleba
The fiscal reform, introduced early this year by Mirek Topolánek’s centre-right government, increased the VAT on food from five to nine percent. Together with the rising costs of oil and other energies, Czechs have had to pay up to 30 percent more for some commodities than a year ago. Jan Veleba, the head of the Czech Agrarian Chamber, associating the country’s food producers, now believes that yet another price hike lies ahead.

“In the case of the Czech Republic, the price of pork will certainly go up because breeding is really going down right now; the numbers of pigs in the country are dramatically decreasing. This will inevitably lead to a situation when the offer will not cover the demand for pork. We suppose this might happen at the beginning of the second half of 2008. Prices of bakery products keep going up as well. I believe that this, together with the increasing prices of rice, oil and other commodities, will lead to another price increase of 10 to 20 percent.”

Jan Veleba blames the government for not taking any action to halt the sharp increase in the price of basic foodstuffs. Although the current forecasts suggest that Europe’s agricultural crops will be excellent this year and might help keep food prices low, Mr Veleba says there is only one thing that needs to be done.

Agriculture Minister Petr Gandalovič
“Various countries from around the world, as well as the World Bank and the UN have been reacting with different political and economic steps to deal with the world’s growing demand for food. In the Czech Republic, Agriculture Minister Petr Gandalovič has come up with a reform of the country’s agricultural policy which does not at all mention agrarian production. There is only one way to deal with the increasing food prices: to rapidly use all our resources to intensify food production. It really is high time we start acting to meet the growing demand for food.”

The Czech Agriculture Ministry has acknowledged the situation but is not considering introducing any special measures. Deputy Agriculture Minister Stanislav Kozák says that the European Union, and the Czech government, has already addressed the issue.

“Even the European Commission has come to recognize this and has abolished the duty to put land into set-aside in the old 15 EU countries. In the Czech Republic, an incentive working towards this goal is the fact that agricultural producers have the option to draw the top-up payments of up to 30 percent from the national budget so I don’t think we need to introduce any other measures at the moment.”

If the prospects of record harvests this year come true, the increase in food prices in the Czech Republic, and elsewhere in Europe, might not be quite so dramatic. But Tomáš Sedláček, the chief strategist for the ČSOB bank, says European agriculture will eventually have to adapt to the changing global food market.

“I think that the future of Europe will be in “high-tech” agriculture, in bio production that will be supplied to the European and other sophisticated markets that can afford higher prices while regular foodstuffs will be exported to other countries. Europe, and the Czech Republic with it, will have to see dramatic changes to the common agricultural policy. In the past, our policy was built on pushing the prices of food up; that will no longer be necessary.”