Ulster Bank chief economist, Richard Ramsey, believes that food inflation will become a major factor within Northern Ireland’s economy during the second half of 2022, and possibly beyond.

He spoke at a recent event in Belfast, held to makr the bank’s sponsorship of this year’s Balmoral Show.

Ramsay presented his annual Ulster Bank Ulster Fry Index, which shows that the price of all items making up the cooked breakfast ‘gauge’ rose in the year to the end of February, using the UK Retail Price Index (RPI). 

Milk saw the biggest price increase in the index with a rise of 16.7% in the 12 months. There were also strong rises in the prices of a range of other items including eggs (8.2%), butter (6%), mushrooms (7.1%), bread (5.6%) and sausages (4.3%). 

The average inflation rate of the items included within the index rose by 6.4% in the past year, meaning that the index is at its highest level since March 2014. This was the peak of the Ulster Fry Index and coincided with another cost-of-living crisis. 

Challenges with food inflation

Ramsey went on to point out that the index contains a more important message this year than ever. 

He explained: "Food makes up a significant proportion of household spending. 'Food and drink' is also a key sector of the Northern Ireland economy.

“So, understanding how the price of food items is changing gives us some insight into both the current state of consumer finances, and also some of the challenges facing the agri-food industry.

"The fact that we are now in a new cost-of-living crisis means that creating understanding of price rises and cost pressures, and where they are coming from, is essential.

"What the Ulster Fry Index is telling us is that the prices of everyday items like milk and bread are rising really strongly at a time when households are also having to contend with big rises in their household energy bills.”

According to the bank representative, the index is only going to go one way in the foreseeable future, and that is up.

"Given the surge in energy prices already, alongside the disruption to the global food supply chain stemming from the war between Russia and Ukraine, the Ulster Fry Index is expected to experience double-digit inflation over the next 12 months. This would see the Ulster Fry Index hit a new record high," he explained.

"Exactly this time two years ago, we thought we were entering a food crisis. People were stockpiling food items in the expectation of supply shortages and empty shelves, despite repeated reassurances from the industry and politicians.

“The reality was that the food and retail sectors pulled out all the stops to keep the supply lines open and to keep us fed," Ramsay added.

Food security

The Ulster Bank economist explained that two years on, a new and worrying food crisis is on the cards for different reasons.

He said that Russia and Ukraine are two of the most important producers and exporters of agricultural commodities in the world.

“Overall, the two countries export one in eight of all calories traded worldwide. What Saudi Arabia is to oil, Ukraine and Russia are to cereal crops," Ramsay stated.

“And don't forget that cereal crops aren't just a direct source of food, they are also a major indirect source of food in that they are fed to the livestock that we then consume.

“Food supply problems will further fuel economic nationalism due to the scramble for food security, meaning the further unwinding of globalisation, or de-globalisation.

“Indeed, such is the concern about the supply of food, that countries are now hoarding and stockpiling by banning exports."