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When will reduced inflation in Denmark mean lower food prices?

Inflation in Denmark was lower in November than in October, the first time since 2021 that the figure has fallen from the preceding month. But experts warn that this may not be apparent in prices paid by consumers.

When will reduced inflation in Denmark mean lower food prices?
Inflation is down in Denmark, but supermarket prices are still up for the time being. Photo: Ida Guldbæk Arentsen/Ritzau Scanpix

Up to six months can go by before the effects of lower inflation are reflected in everyday prices, an expert said on Monday after the national stats agency Statistics Denmark reported a drop in inflation had occurred in November compared to October.

“It will take up to half a year before we see an effect in the form falling food prices in shops,” Henning Otte Hansen, senior consultant with the University of Copenhagen’s Department of Food and Resource Economics told news wire Ritzau.

READ ALSO: Inflation down in Denmark but forecasts tentative for 2023

A decline in electricity and gas prices experienced last month is one factor in the lower inflation in November, senior analyst Louise Aggerstrøm Hansen of Danske Bank said.

Energy prices have since begun to climb again, partly due to the onset of winter weather.

Raw foods may also be falling in price and helping to reduce inflation, according to Otte Hansen.

“We are seeing cheaper and cheaper agricultural raw products and that will also rub off on final food prices within a relatively short time,” he said.

“But a certain lag must be accounted for from when we get cheaper raw materials to getting cheaper foods,” he said.

However, increases to the price of some foods may begin to flatten out as soon as January, he said.

“But the underlying conditions in the form of cheaper agricultural raw materials, a good harvest in several parts of the world and cheaper transport are positive signs we will get cheaper foods,” he said.

Lower prices in the energy sector also have a knock-on impact on food prices, he noted.

Consumer rights organisation Forbrugerrådet Tænk said that it expects the price of food to drop in accordance with energy prices, but not immediately.

“Although general price increases have actually fallen quite markedly, the price of foods has still gone up by 0.5 percent and that means it will still get more expensive to shop at the supermarket,” the organisation’s senior economist Morten Bruun Pedersen said.

Pedersen sounded a more optimistic note than Otte Hansen, however, and said that some price drops could be seen by February.

Although inflation has taken a step backwards, it is still far higher than what would be considered a normal level for price increases year-on-year.

Inflation of around 1-2 percent has been around the normal level seen in recent years.

READ ALSO: EXPLAINED: What’s causing the highest inflation rate in Denmark for 40 years?

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How much could Danish agriculture CO2 tax affect food prices?

A new model for CO2 emissions tax on agriculture could mean customers pay more for a packet of beef, according to the expert committee which recommended the model.

How much could Danish agriculture CO2 tax affect food prices?

An expert committee on Wednesday presented its proposals for a carbon emissions tax on agriculture, including calculations of how the carbon tax will affect the price of products like meat and milk for consumers in Denmark.

The committee proposed a starting level of 750 kroner per ton emitted, along with two other options: 325 kroner and 125 kroner per ton emitted.

The highest rate, 750 kroner, would result in the price of 500 gram packed of beef increasing by 4.5 kroner, the head of the committee, Michael Svarer, said at a briefing.

For the 325-kroner rate, this would fall to 2.3 kroner. If the tax was 125 kroner per ton emitted, the price of 500g of beef would go up by 1.4 kroner.

For a litre of milk which currently costs 13 kroner, the price increases at each increment of the emissions tax would be 0.6 kroner, 0.3 kroner and 0.2 kroner respectively.

READ ALSO: Danish expert committee proposes CO2 emissions tax for agriculture

On average, the price of dairy and meat products would go up by just under 4 percent by 2030 if the model was imposed.

However, this is not expected to have an impact on inequality once factors like wage increases are taken into account, the committee found.

Any final decision on a CO2 emissions tax on agriculture must be made by parliament in the form of majority support for a bill. The government is not obliged to follow Tuesday’s recommendations.

The numbers should also be treated as a guide rather than hard fact, Svarer noted during the briefing.

“There are many steps you must go through and there’s naturally a lot of uncertainty,” he said.

Prime Minister Mette Frederiksen has previously stated she did not want a green tax to push up food prices.

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