Q11 - Agriculture: Aggregate Supply and Demand Analysis; PricesReturn

The article deals with the development of consumer prices in the Czech Republic in the context of food prices in the European Union and the World market. This article aims to identify consumer prices development in the market in the Czech Republic in relation to the development of consumer prices in the world market and the EU market. The paper is also analyzing the development of consumer prices in relation to individual commodities and products sold in Czech retail companies. The position of the most significant retail chains in Czech market is highlighted and price differences among individual retail chains are identified. In relation to the results it can be said: Prices on the Czech market very strongly correlate especially in relation to the EU market, a little bit lower (but still significant) correlation is existing in relation to the World market. Czech consumer price sensitivity is very strong - very flexible to changes in the price level on the market of the EU (cc more than 1%) and vice versa inelastic (cc 0,3%) with respect to changes in the price level on the World market. CR follows the general development price trends which exist in the EU market. In relation to particular commodity segments in CR we can say that food prices increased fastest in case of fruit and vegetables, oils and fats, dairy products, fish and seafood, poultry, beef and cereals and bakery products. In the Czech Republic there is no uniform price level between regions. On the one hand Czech retail market is very concentrated - a relatively small number of players control the character of the market - but compared to the European average we can say that the market is highly competitive (the result of this development is the fact that already several retail companies left the Czech market during the last several years), because none of the subjects clearly dominates on the market. Individual retail chains in their pricing policies more or less follow the same general price trends and tendencies which are similar to the price development of the domestic market and especially the EU market.

Czech food market is significantly influenced by EU market development. Food prices tend to converge to the long-term average of prices in the EU market and they copy EU price trends. The paper aims to identify the relationship between the development of prices in the global market and EU market. Another aim is to analyze the development of prices in the retail market in the Czech Republic and to identify the basic trends in selected food products. The article focuses primarily on the elasticity of selected foodstuff aggregations in relation to global prices development. There is also analyzed the impact of changes in rates of VAT from 10 % to 14 % on food prices in general and prices of selected products in selected retail companies. The results of analyzes show that Czech food market reacts sensitively to changes in food prices on global markets as well as on the EU market. It should be highlighted that the influence of EU market on Czech food price development is much higher than the influence of global market. The growth rate of VAT is not completely absorbed by traders and producers and the certain portion of VAT rate growth is transferred into final consumer prices.