Are the increases in food prices justified?

The recent price increases for grain, milk and dairy products have caused consumer unease, since food prices had been stable for decades. What has led to the price increases? For Stefan Tangermann, OECD, the markets for agricultural products including food in the EU have "entered a new era". Agricultural policies have been reformed and subsequently agricultural prices have decreased in the EU. At the same time, the world market prices for farm products have increased clearly. Both price movements have now come together, and for the first time price developments for worldwide agricultural markets have also led to price movements in the EU. Ursula Heinen, Federal Ministry for Nutrition, Agriculture and Consumer Protection, points out that the function of prices as an indicator for scarcity on the agricultural commodities markets is again moving into the forefront and production decisions in agriculture are now more determined by market prices than by government price-support policies. Society must rethink its position: "If we expect quality - which is certainly the case for food products - we must also be prepared to pay a suitable price." Christian Thorun, Federal Consumer Association, believes that the trend of food price increases is justified even though some price levels are not always comprehensible: "Although the price-increase trend can be explained with increasing raw material prices and production costs, there are indications that support the suspicion that the food industry and distributors are using the present climate of price increases to boost their own margins. The amount of price increases cannot be attributed to cost increases in every individual case." Bernhard Brümmer, University of Göttingen, points out that this development, observable since the second quarter of this year, has led to more than a doubling of (nominal) prices since 2005. It is, however, also clear that the high prices of the 1970s, for example, have not been matched by any means.