The Food Price Index released this week by Statistics New Zealand shows that the overall fall of 2% is the largest annual drop in food prices since 1957.
However, the fall follows a rise of nearly 17% rise in the two years to July last year, when prices peaked.
Statistics New Zealand prices manager Chris Pike said the falls could be a response to the big price rises seen last year.
In the far south the drop was not quite as large as the national figure, with the area south of Canterbury recording a 1.4% drop for the year, Dunedin on 1.89% and Invercargill prices only .99% lower than in June a year ago.
Food and Grocery Council chief executive Katherine Rich said the FPI figures were a timely reminder of the gap between reality and perception over food prices.
"Fruit and vegetables, meat, poultry, and fish are all cheaper than they were this time last year." The idea food prices had been spiralling out of control was not borne out by the evidence, she said.
The council suspected the fall in grocery prices had a lot to do with the intense competition between the two supermarket chains and competitive pricing on many grocery items.
Increases in the cost of some dairy products reflected improving international commodity prices, she said.
NZ Beef and Lamb chief executive Rod Slater said prices going down were always bad for farmers and good for consumers.
"While we've had record prices for lamb in this country because of the rate of exchange that we've got, the farmers aren't really seeing the benefit of this. Their production costs have gone up as well."
Horticulture NZ had similar concerns, with a spokeswoman saying any price drop meant farmers were getting less for their produce.
• Food prices for the month of June show a rise of 1.3%, compared with May, with the largest price rise in fruit and vegetables (9.3%). Statistics NZ said higher vegetable prices were usual in winter with the most significant increases in tomato, lettuce and cucumber.
- additional reporting by the NZ herald.
