'Farmers have taken the pain of lower prices, but that is still not being felt along supermarket aisles'

Inflation is the word of the week when it comes to news. It is positive that the UK rate dropped in October by more than analysts predicted.

At 4.6% it is now at a rate that will cause less damage to the economy, even if it is still well over twice the 2% Bank of England target rate. This suggests there will be no early reduction in interest rates, which were increased to counter inflation. Rates are likely to drop before next summer, which will play well for the government as it heads to an election.

This has allowed the government to claim it met its commitment to half the inflation rate, with a month to spare to the end of the year. However, the fall has had little or nothing to do with any government actions. Inflation has been falling in all major economies, including the eurozone, and the UK figure is still higher than rates in Europe or the United States. The fall is almost entirely down to global prices, particularly energy costs, coming off their peaks.

This is why the fall is not something for which the government can claim credit. Indeed by not tackling inflation in key parts of the public sector, it has arguably made inflation worse. This may explain why the UK drop is less than in other countries. However, in the world of politics, the government can claim it delivered on its target, and whether or not that is true, the reduction is welcome.

Food price inflation has been the price driver people have noticed, mainly because they had factored in the energy price spike. It crept back into double digits in October, rising from 9.9 back to 10%. This was probably down to the impact of the wet weather on many seasonal vegetable crops, meaning the rise was a 'normal' pattern rather than the reversal of a welcome downward trend.

According to figures from the UN Food and Agriculture Organisation (FAO) its monthly index figure for October maintained falling food prices. The drop, compared to September, was modest at 0.5%, but smaller drops are inevitable once the steam has gone out of commodity price rises. On the basis of these global events food price inflation should be all but out of the equation by now, but that is not happening as fast in the UK as elsewhere.

Why this should be has never been fully explained. It will be down to lagged price increases, such as wage inflation, already in the system, but the bottom line remains that the rate should be falling faster than it is. Farmers have taken the pain of lower prices, but that and the slide in global food commodity prices is still not being felt along supermarket aisles. On the FAO index food prices in October were

11% down on the same month in 2022.

The most recent FAO falls were led by vegetable oils, cereals and meat. After nine consecutive months of reductions, dairy prices finally rose marginally in October, suggesting the bottom of the price curve may have been reached. This is being put down to tighter than expected milk supplies in Europe and concern that an El Nino weather pattern could impact southern hemisphere production.

This has brought buyers back into the market, particularly in Asia, where there is now a greater willingness to hold stocks. Despite this small gain, dairy prices are still 20% below their October 2022 level. Cereal prices are back by 18%.

The EU has been looking, separately, at food prices from 2021 to the inflation peak of 2022. These conform why higher prices shocked consumers, with eggs up 37% and dairy by 27%. This was made worse by 2021 already having seen price rises in 2020. For farmers, the hope has to be that as markets find a new balance they will not be plunged back to the many years when they were forced to subsidise retailers and consumers by producing food below the cost of production.

Everyone along the food chain gains from stability. Hopefully what is happening now confirms that the extreme volatility from February 2022 the start of the war in Ukraine is now finally coming out of the system.

If that is the case it will benefit everyone along the food chain.