Commodity costs have fallen sharply, but retail prices are following only sluggishly - and nowhere more so than on the humble staple rice.

A 1kg bag of long-grain rice at the big four costs an average £1.34 - more than double the 65p price this time last year [Grocer 33 w/e22 May]. But the commodity price of white rice has tumbled 40% over the same period [Mintec].

It's the latest and starkest in a line of time lags to emerge between wholesale and retail price falls.

The price of many staples, such as rice, butter, cheese, potatoes and onions, soared last year. Most have since fallen back but, as The Grocer has revealed, retail prices have not always followed suit.

The surge in rice prices was caused by a string of bad harvests, which caused countries including India to ban rice exports amid fears of shortages. Last April and May, commodity rice prices shot up from around £160 a tonne to over £500 - but fell back to around £350 in July.

Supermarket prices had mirrored the increase as early as June, but did not fall back again until March, when Asda put rice on a £1 price deal, which was matched by its rivals. Rice has since returned to its higher price, despite India being on the verge of removing export restrictions after announcing a record 99.7m tonne rice harvest. Freight costs have also fallen as demand for container ships falls and oil prices decline.

"The rice that's currently on sale in our stores was bought back in September last year - much closer to the peak than now," said an Asda spokeswoman. "Although it's fair to say we've seen a slight increase in the price of rice, it's a direct result of increasing costs of production and the weak pound - both factors beyond our control. As soon as prices fall, we immediately pass these savings onto our customers."

Potatoes have also risen sharply in price year-on-year, with bagged white potatoes up 34.1% and new potatoes up 44.6% year-on-year, again despite apparent drops in commodity prices of up to 40%. Grocers suggested part of this was due to quality problems with early season French and Spanish crops.

"We've seen a deflation on our retail price of potatoes from a year ago - this time last year quality crops were in short supply, which put pressure on the retail price," said a Morrisons spokesman. Supermarkets typically agree longer-term supply deals rather than buying from wholesale markets, which can cause price decreases to lag.

However, some have speculated supermarkets were holding off reducing prices to recover costs. "It's possible by delaying falls in retail prices, supermarkets can recoup some of the profit hit taken when costs went up," said Assosia MD Kay Staniland.
...but butter's got better
The Grocer reported in October that wholesale butter prices had tumbled while retail prices stayed high. Since then, wholesale butter has only got cheaper - so cheap the EU has stepped in to prop up prices. But the good news for shoppers is that retail prices have started to follow suit. Country Life is down 19% from its peak and Anchor 7%, though own-label is lagging behind with a 1% drop.