MercoPress. South Atlantic News Agency

Argentina: Skyrocketing food prices threaten gov't inflationary targets

It is highly unlikely that Milei's administration can record a 2% inflation in March with food prices going up as they are

Argentina is experiencing a sharp increase in food prices, complicating the government's goal of keeping inflation close to 2%. Private consulting firms report that food prices rose by approximately 3.2% to 4% so far this month, with total inflation projected to be between 2.4% and 3%. Key drivers include dairy and eggs (up 5.8%), meat (up 5%), vegetables (up 3.3%), and beverages (up 2.2%).

The consulting firm LCG noted a 3.8% increase in food prices for March, with a slowdown to 0.4% in the fourth week from 2.4% earlier in the month. ECO Go estimated a 3.2% rise in food prices and 2.6% overall inflation, while Analytica projected 3.4% for food and 2.5% for general inflation.

This rise in inflation, nearing 3%, challenges the government's 1% crawling peg exchange rate policy, potentially increasing overall economic prices and prompting speculation of an exchange rate regime change tied to an IMF agreement.

President Javier Milei has denied rumors of an impending devaluation, but the persistent food price hikes, including a 15% surge in egg prices in recent weeks (35% year-to-date), with a maple (30 units) now costing over AR$ 7,000 (US$ 5.38 at the unofficial “blue” exchange rate) threaten the Libertarian administration's targets.

Factors driving egg prices include seasonal production dips, sustained demand, and exports spurred by an avian flu crisis in the US, reducing local supply. Despite these pressures, Argentina remains a top global egg consumer, averaging 360 eggs per person annually.

ECO Go's measurement for the third week of the month reflected an increase in food of 1.1%, which projects the item to an advance of 3.2% in March. Hence, it estimated that inflation for the month would be close to 2.6%, while LCG forecasts a 3.8% monthly adjustment. These projections shadow the Government's intention to reach an elusive 1% rate. Analytica, which focuses on retail prices in the Greater Buenos Aires area, foresees “a monthly increase of 2.5% during March.”

“There was no weekly variation of prices in the general level, while food and beverages presented a positive variation of 0.3%. Therefore, the 4-week moving average stood at 2.7% for the general level,” Invecq economists wrote in a separate report.

In addition, Argentina's Central Bank (BCRA) sold dollars again while markets are suspicious of the IMF Agreement, particularly after it was announced that the Government is fetching some US$ 20,000.