EXECUTIVE SUMMARY

WHO DETERMINES
THE COST OF FOOD?
A study on Belgium, Sweden, France, United Kingdom and Argentina.
WWF-EU and WWF-UK commissioned RSK
ADAS Ltd (ADAS) to undertake a desk-based
review investigating the determinants of the cost
of food. More specifically, the study sought to
identify government policies and other factors that
influence the price of food.

Food pricing is complex and involves various

factors from the production process through
to the finished product on the shelf. Typically,
governments avoid direct intervention in the
market until the point of market failure is reached.

This study has been conducted within the

framework of WWF’s #Eat4Change project, funded
by the European Commission’s Development
Education and Awareness Raising Programme
(DEAR).

WWF is an independent conservation organisation,

with more than 38 million followers and a global
network active through local leadership in over 100
countries.

Our mission is to stop the degradation of the

planet’s natural environment and to build a future
in which people live in harmony with nature,
by conserving the world’s biological diversity,
ensuring that the use of renewable natural
resources is sustainable, and promoting the
reduction of pollution and wasteful consumption.

The European Policy Office contributes to the

achievement of WWF’s global mission by leading
the WWF network to shape EU policies impacting
on the European and global environment.

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Published in September 2023

by WWF – World Wide Fund For Nature
(formerly World Wildlife Fund), Brussels, Belgium.

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EXECUTIVE SUMMARY: WHO DETERMINES THE COST OF FOOD?

CONTENTS
BACKGROUND 4
POLICY INFLUENCE ON FOOD PRICES 6
COUNTRY COMPARISONS 8
OTHER DETERMINANTS OF FOOD PRICES 10
RECOMMENDATIONS 11

3
 WHO DETERMINES
THE COST OF FOOD?
A study on Belgium, Sweden, France, United Kingdom and Argentina.

Recent global events, such as the war in Ukraine

and the Covid-19 pandemic, caused significant BACKGROUND
disruption to the food supply chain, contributing
Global events over the past two years
to the rise of food prices. have seen basic food commodity
prices rapidly increase. With Russia
and Ukraine both key players when
it comes to ensuring a stable supply
160 of food and energy, it is no surprise
the war between the two nations has
disrupted global supply chains. The
140 impacts of the conflict, on top of the
shocks from Covid-19, have resulted
in price pressures being felt around
120 the world. The Food and Agriculture
Organization (FAO) estimated that
the world food price index (Figure 1)
100 finished 2022 at 132.4 after spiking
INDEX (2014-2016=100)

to 159.7 in March. This constituted a

significant increase when compared to
previous years.
80
In 2017, the World Bank International
Comparison Program (updated every
60 seven years) estimated that 381 million
people could not afford the most basic
energy-sufficient diet. With the onset
40 of the pandemic, it was estimated that
three billion people could not afford a
healthy diet1(Our World in Data, 2021).

20 With inflation levels reaching new

heights in 2022, many nations
including the United Kingdom (UK)
0 and members of the European Union
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1 | A healthy diet is defined as one which helps to

MONTH protect against malnutrition in all its forms, as well
as diseases such as heart disease, diabetes, stroke
and cancer. A healthy diet should limit intake of
sugars, salt and unsaturated fats (World Health
FIGURE 1: World food price index (monthly). Index 2014-2016=100. Source: FAO (2023) Organization, 2020).

EXECUTIVE SUMMARY: WHO DETERMINES THE COST OF FOOD?

 © Shutterstock

(EU) have seen no real wage growth. billion sales growth of plant-based
Paired with plummeting consumer food products in 2022, an increase of
confidence and reduced spending, 21% since 2020 (Good Food Institute,
many economies have been tipped 2023). However, the increasing
into economic decline and a cost-of- demand for plant-based food has not
living crisis. As a consequence, many always translated into policy measures
households have been forced below that effectively support sustainable

381
the international poverty line and are food production and consumption.
unable to purchase even a calorie-
sufficient diet. National governments As price is one of the major drivers for
have therefore been tasked with food consumers’ choices, this study has
designing intervention measures to aimed to identify existing policies that
might have or have had an impact on
support both agricultural producers
food prices.
MILLION
and consumers.
In particular, this study looks into the
PEOPLE COULD
These interventions have taken a
variety of forms, including subsidies cost of food and existing policies in NOT AFFORD
and other government spending five countries. These include Belgium,
France and Sweden, which are directly
THE MOST
(through investment or state aid). In
many nations, supportive measures affected by EU policies, as well as the BASIC ENERGY-
have also been coupled with trade- UK and Argentina. Argentina was
included as an example of a non-EU
SUFFICIENT
restrictive interventions, such as tariffs
and quotas, in an effort to protect country where food price inflation DIET IN 2017
domestic markets. These measures, represents a daily struggle for the
however, have caused significant majority of the population, and
supply chain disruptions and food where the government has tried to
price variation. tackle rising food prices with targeted
policy actions.

MOTIVATION FOR THE STUDY The study2 focuses on measures and

actions taken by governments and
The agricultural sector generates an other major economic actors such
estimated 34% of total global annual as retailers and investors (market
emissions, with more than seven speculators) and their influence on
billion tonnes generated in production food prices. It draws on qualitative and
(Crippa et al., 2022). WWF is striving quantitative evidence identified in the
for more sustainable food production literature and uses empirical evidence
and consumption, including through to provide conclusions and policy
the transition to more plant-based recommendations.
diets, for the wellbeing of people and
the planet (WWF, 2020). For both
health and environmental reasons, the
2 | Full report available at https://wwfeu.
demand for more plant-based diets is awsassets.panda.org/downloads/Report-who-
higher than ever, with a record €5.8 determines-the-cost-of-food.pdf

5
POLICY INFLUENCE
ON FOOD PRICES
EU national governments are currently not sufficiently
intervening to make sustainable food more accessible.
However, the EU has previously employed various policy
levers, mainly to insulate the domestic market and protect
producers, which actually had an impact on food prices.
Policies have included voluntary coupled support (VCS);
production quotas; a grain import levy; purchase and storage;
export subsidies; tariffs and tariff rate quotas.

VOLUNTARY this results in lower prices on the shelf,

making subsidised products more
COUPLED SUPPORT – affordable for consumers.

OVERCONSUMPTION VCS constitutes on average 8–13%

of the Common Agricultural Policy
OF MEAT AND DAIRY (CAP) European Agriculture Guarantee
Fund, which stands under the first
VCS (only applicable to EU member pillar of the CAP (also known as “direct
states) is the main scheme where the payments”). VCS has a significant
impact on market prices has been impact on the price of dairy and meat.
quantified within the literature. The Currently, around 70% of the VCS
scheme links payments to production goes to the livestock sector, which
of certain agricultural products. As results in lower prices of meat
the VCS subsidy increases, so too does and dairy products, ultimately
production, leading to more supply fostering their overproduction
of the subsidised product. Ultimately, and overconsumption.

Simulation of removal of VCS payments in all sectors

29,3% 8,2%
DECLINE IN THE
PRODUCTION OF DECLINE IN
PROTEIN CROPS PRODUCTION OF BEEF
(CURRENTLY MAINLY
USED FOR FODDER)
FROM SUCKLER COWS

FIGURE 2: A 2015 study showed that if VCS payments in all sectors were removed, the production of meat and
protein crops largely used for fodder would decrease significantly (Offermann et al., 2015).

EXECUTIVE SUMMARY: WHO DETERMINES THE COST OF FOOD?

VCS is pumping livestock production producers. However, this mechanism agriculture sector but would
while decreasing the price of meat does not apply to fruit, vegetables also decrease the exposure and
products, despite clear evidence of and organic products, despite their vulnerability to price shocks.
the sector’s significant environmental potential benefits for the environment
impacts. Policy measures that stop
overproduction of meat are essential
and human health. This means
that certain categories of products
LACK OF TRANSPARENCY –
to face the ongoing climate and
biodiversity crises. These policies
do not benefit from the same level
of market protection. This may
NO ROBUST DATA TO DESIGN
should be combined with actions to discourage farmers from producing EFFECTIVE PUBLIC POLICY
support more sustainable diets – more sustainable food and make
otherwise the EU might simply increase environmentally friendly products less Robust data is needed to design
imports of meat and dairy from third accessible to consumers. effective public policies that address
countries, leading to an increase in the complexity of food environments
greenhouse gas emissions outside its
territory (carbon leakage).
FERTILISERS – MAKING OUR in order to foster more healthy and
sustainable food consumption. There
MARKET MORE SUSCEPTIBLE is a lack of publicly available data

THE EU FIXED PRICE TO EXTERNAL SHOCKS

and transparency on marketing
policies of food retailers. Additional
MECHANISM – NOT THE The price of fertiliser is a major driver
barriers that prevent robust data
collection and analysis of food
SAME PROTECTION FOR ALL of food prices. The EU’s vulnerability
to market distortions in fertiliser trade
prices within each nation include
significant differences in methods of
PRODUCTS is especially acute since fertilisers collection and a lack of standardised
represent 18% of input costs for arable approaches.
The EU fixed price mechanism is crops and 74% of EU farmland is
an EU policy acting as a price floor. currently fertilised.
It aims to fix a price at which a
given quantity of food product will Policies directed at supporting a
be purchased, preventing prices decrease in fertiliser use would
of products from falling to levels therefore not only reduce the
that are not economically viable for environmental impact of the

© Shutterstock

7
COUNTRY BELGIUM
The recently accepted CAP strategic
FRANCE
The recently accepted CAP strategic

COMPARISONS
plan for Belgium makes provisions plan in France rewards farmers in
to diversify the fruit and vegetable the livestock sector who also produce
sector, as well as to diversify sales protein crops (e.g. soy) by providing
and investment in new plantations, extra financial support.
by supporting both infrastructure
The study also assessed and digital infrastructure. In the long In June 2022, hail, strong winds and
torrential rain caused damage to
evidence related to term, consumers should start to see
increased choice of Belgian-produced agricultural lands, with some farmers
policy influence on fruit and vegetables on supermarket seeing 100% of their crop affected,
shelves and less price fluctuation for particularly those producing wheat and
food prices for five these products. fruit. As a result of extreme conditions,
driven by climate change, there have
countries: Belgium, VAT rates on meat are set at 6%, been supply shortages contributing
France, Sweden, the exactly as for food products that are to the rise in food prices. At the time
more sustainable and healthy, such as of this study, no clear policies have
UK and Argentina. fruit and vegetables. No literature was been put in place to support climate
identified that quantified the impact adaptation and mitigation measures
of the reduced rate on the prices of in the agricultural sector or to address
basic foodstuffs in Belgium. However, other environmental factors, such as
reduced VAT rates are aimed at ecosystem degradation and biodiversity
lowering consumer prices (IMF, 2022). loss, that undermine the resilience of
food production in France.
To assist with the cost of living, the
Belgian government is considering
collaborations with large supermarkets
to freeze consumer prices. This
initiative, however, does not prioritise
sustainable food.

© Envato

EXECUTIVE SUMMARY: WHO DETERMINES THE COST OF FOOD?

SWEDEN UK ARGENTINA
Sweden, like Belgium and France, is The UK departed the EU on 31 January Agricultural policy has typically
a member of the EU and therefore 2020 after 40 years of implementing played a significant role in both the
benefits from the European Free Trade the CAP. Since leaving the EU, the import substitution policy and raising
Association (EFTA). However, Sweden UK has negotiated a number of free revenue in Argentina (Regúnaga and
is not a member of the Eurozone. trade agreements (FTAs) and there Rodriguez, 2015; Piñeiro et al., 2019).
Exchange rate volatility between the are now 70 in force. The OECD (2022) Import substitution assumes domestic
Swedish Krona and the Euro can lead to outlined the potential for the FTAs demand should be met through
reduced price stability and potentially with Australia and New Zealand to domestic production and should be
higher food prices in Sweden. increase competition in the beef and the main source of economic growth.
sheep market. As a result, the FTA The government has therefore imposed
The VAT rate imposed on meat is 12%, could increase the quantity of agri- high rates of export taxes (which have
the same as for basic foodstuffs such food products imported into the UK, been adjusted in the last decade) on
as cereals, fruit and vegetables. This in particular beef and lamb. Increased many agricultural products, such as
shows that there is not much action consumer choice and a reduction in soybeans, cereals, vegetable oils and
from the government to incentivise prices of meat are the likely outcomes. bovine meat. However, this policy has
plant-based food consumption. halted improvements in international
Unlike the other nations in this study, competitiveness and economic
A study which simulated the impact of the UK has a 0% VAT rate on basic performance.
an environmental tax on consumption foodstuffs including cereals, meat,
in Sweden suggested this would reduce animal products, fruits and vegetables. A simulation by Piñeiro et al. (2019)
the consumption of meat and animal This study could not identify empirical showed that a progressive reduction
products (Säll and Gren, 2015). In evidence of the impact of the flat rate of export taxes on cereal grains would
particular, the simulation showed a on the final consumer price. reduce the world price by 2.17%. This
19% reduction in beef consumption, reflects Argentina’s global importance
equating to a reduction of 4.7 kilos per as a cereal producer.
capita per year. However, a unilateral
implementation of the tax would likely Consistent droughts caused by the
result in increases in emissions where La Niña weather phenomenon have
the product is imported from, if other caused significant issues for Argentina’s
measures to support dietary changes agricultural sector in recent years,
are not combined with this type reducing farmers’ yields. Buenos Aires
of taxation. Grain Exchange has estimated the loss
could be up to US$4 billion (the actual
figures are due to be published by the
end of 2023). This has contributed to
3 | A product can be zero-rated (0%) providing
it has some measurable nutritional value (UK
substantial supply chain shortages,
Government, 2022). driving consumer prices up further.

VAT RATE (%)

FOOD
BELGIUM FRANCE SWEDEN UK ARGENTINA
MEAT AND EDIBLE OFFAL 6% 5.5% 12% 0% 10.5%
MILK AND DAIRY PRODUCTS, 6% 5.5% 12% 0% 10.5%
AND OTHER ANIMAL PRODUCTS
VEGETABLES 6% 5.5% 12% 0% 10.5%
FRUIT 6% 5.5% 12% 0% 10.5%
OTHER PROCESSED FOOD PRODUCTS 21% 20% 12% 0%3 21%

FIGURE 3: VAT rates imposed on food products.

9
 OTHER DETERMINANTS
OF FOOD PRICES
WAR IN UKRAINE MARKET FACTORS
As a result of the war in Ukraine which began in February Market factors such as import prices, exchange rates,
2022, 16 nations have imposed trade restrictions, ranging transport and fertiliser prices play a significant role in food
from exporting bans to licensing requirements. Russia prices. Key influences include:
and Ukraine are major producers and exporters of grains,
accounting for 4.4% and 4.3% of total global calories Import prices and exchange rates. These influence
respectively. Both have imposed export restrictions on major what the consumer pays for products on the shelf. In the case
cereal grains including wheat, barley, rye and maize. of Sweden, the Krona has depreciated in value against the
dollar in the past couple of years. This means that imports
Overall, measures from all 16 nations accounted for 17% of have become more expensive for importers paying in dollars,
total global traded calories. The outcome has been substantial which has put an upward pressure on consumer prices.
supply shortages, which have driven consumer prices up.
Transport cost. The cost of transporting food has direct
implications for the supply of food (Cooke, 2009). As the cost
of crude oil increases, so too does the cost of fuel at the pump,
60 resulting in higher prices on the shelf.
50 Fertiliser prices. Fertiliser prices are an input cost of
40 production (Cooke, 2009). Increases in the cost of production
160
are often passed through to consumers in the form of higher
Million Tonnes (MT)

140 30 prices so producers can uphold their profit.

20
120
10
100
0 900
80
800
60
700
Price ($per metric ton)

40
600
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/23

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MONTH 400
300
FIGURE 4: Russia production and exports of cereals in millions
of tonnes (2010/11 – 2022/23). Source: FAO AMIS (2023). 200
100
0
19 01
20 01

20 01
20 01
20 01
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MONTH
FIGURE 5: Monthly trend in fertiliser prices from January
1996 to January 2022. The impact of the war between Russia
and Ukraine has seen fertiliser prices soar to highs not seen since
the global financial crisis in 2008. This is no surprise given Russia
was, at the start of the conflict, the global leader in fertiliser exports,
controlling around 15% of global fertiliser exports4. Russia is also
the leading exporter of ammonia, urea, phosphate and potash, key
fertiliser raw materials. Unless other countries are able to increase
production or substitute them with more environmentally sustainable
materials to offset the loss of supply from Russia, the price of
fertiliser will remain high and will continue to have flow-on effects to
crop production and ultimately the price of food.

4 | See www.worldstopexports.com/top-fertilizers-exports-by-country

EXECUTIVE SUMMARY: WHO DETERMINES THE COST OF FOOD?

 © Freepik

POLICY RECOMMENDATIONS
ALL NATIONS EU AND UK
Education. Production quota.
Promote nutritional and environmental Consider a meat production quota in
benefits of plant-based diets in schools specific regions to mitigate emissions
and in the public domain. and excess nitrogen.

Research and Data. Direct consumption tax.

Pursue a more unified global approach Add a tax on products with negative
to data recording, including production environmental and health externalities,
and consumption data. similar to the sugar taxes in Belgium,
France and the UK that target
Additional studies on VAT. consumers directly. Elasticity of
Conduct further research to better demand for each product should
understand the effect of flat and be considered.
differential VAT rates on final
consumer price. Welfare schemes.
Assess how schemes at the national
level could make sustainable food more
accessible to low-income households.

CAP subsidies.
Repurpose CAP subsidies to support
farming practices with higher social
and environmental standards in order
to increase availability and affordability
of sustainable products.

Coupled support payments.

Repurpose VSC allocations directed to
the intensification of livestock farming.

11
 © Envato

OUR MISSION IS TO STOP

THE DEGRADATION OF
THE PLANET’S NATURAL
ENVIRONMENT AND TO BUILD
A FUTURE IN WHICH PEOPLE
LIVE IN HARMONY WITH
NATURE.

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EXECUTIVE SUMMARY: WHO DETERMINES THE COST OF FOOD?