Let Them Eat Cake: Food Shock Follows Europe Energy Crisis --- Prices rise at a rapid pace, surprising central banks and pressuring indebted governments.

 Military games have their price.

"LONDON -- Fresh out of an energy crisis, Europeans are facing a food-price explosion that is changing diets and forcing consumers across the region to tighten their belts.

This is happening even though inflation as a whole is falling thanks to lower energy prices, presenting a policy challenge for governments that deployed billions in aid last year to keep businesses and households afloat through the worst energy crisis in decades.

New data on Wednesday showed inflation in the U.K. fell sharply in April as energy prices cooled, following a similar pattern around Europe and in the U.S. But food prices were 19.3% higher than a year earlier.

The continued surge in food prices has caught central bankers off guard and pressured governments that are still reeling from the cost of last year's emergency support to come to the rescue. And it is pressuring household budgets that are also under strain from rising borrowing costs.

In France, households have cut their food purchases by over 10% since the start of events in Ukraine, while their energy purchases have fallen 4.8%.

In Germany, sales of food fell 1.1% in March from the previous month, and were down 10.3% from a year earlier, the largest drop since records began in 1994. According to the Federal Information Centre for Agriculture, meat consumption was lower in 2022 than at any time since records began in 1989, although it said that might partly reflect a continuing shift toward more plant-based diets.

Food retailers' profit margins have contracted because they can't pass on the entire price increases from their suppliers to their customers. Markus Mosa, chief executive of the Edeka supermarket chain, told German media that the company had stopped ordering products from several large suppliers because of rocketing prices.

A survey by the U.K.'s statistics agency this month found that almost three-fifths of the poorest 20% of households were cutting back on food purchases.

"This is an access problem," said Ludovic Subran, chief economist at insurer Allianz, who previously worked at the United Nations World Food Program. "Total food production has not plummeted. This is an entitlement crisis."

Food accounts for a much larger share of consumer spending than energy, so a smaller rise in prices has a greater impact on budgets. The U.K.'s Resolution Foundation estimates that by the summer, the cumulative rise in food bills since 2020 will have amounted to 28 billion pounds, equivalent to $34.76 billion, outstripping the rise in energy bills, estimated at GBP 25 billion.

"The cost-of-living crisis isn't ending, it is just entering a new phase," Torsten Bell, the research group's chief executive, wrote in a recent report.

Food isn't the only driver of inflation. In the U.K., the core rate of inflation -- which excludes food and energy -- rose to 6.8% in April from 6.2% in March, its highest level since 1992. Core inflation was close to its record in the eurozone during the same month.

Still, Bank of England Gov. Andrew Bailey told lawmakers on Tuesday that food prices now constitute a "fourth shock" to inflation after the bottlenecks that jammed supply chains during the Covid-19 pandemic, the rise in energy prices that accompanied events in Ukraine, and surprisingly tight labor markets.

Europe's governments spent heavily on supporting households as energy prices soared. Now they have less room to borrow, given the surge in debt since the pandemic struck.

Some governments -- including those of Italy, Spain and Portugal -- have cut sales taxes on food products to ease the burden on consumers. Others are leaning on food retailers to keep their prices in check. In March, the French government negotiated an agreement with leading retailers to refrain from price rises if it is possible to do so.

Retailers have also come under scrutiny in Ireland and a number of other European countries. In the U.K., lawmakers have launched an investigation into the entire food supply chain.

"Yesterday, I had the food producers into Downing Street, and we've also been talking to the supermarkets, to the farmers, looking at every element of the supply chain and what we can do to pass on some of the reduction in costs that are coming through to consumers as fast as possible," U.K. treasury chief Jeremy Hunt said during The Wall Street Journal's CEO Council Summit in London.

The government's Competition and Markets Authority last week said it would take a closer look at retailers." [1]

We all should remember that in the well spreading story the person, who suggested that the poor should eat cake, lost the power soon after. Landsbergiuk, are you the main obstacle to the export of fertilizers from Belarus and Russia? Have you ever tasted something less tasty instead of cake?

1. World News: Food Shock Follows Europe Energy Crisis --- Prices rise at a rapid pace, surprising central banks and pressuring indebted governments. Hannon, Paul. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 25 May 2023: A.18.