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Weather causes ‘turbulence’ with food prices
03/10/2018 - 09:03
The recent hot weather has caused ‘turbulence’ in food prices, according to the latest Foodservice Price Index from CGA and Prestige Purchasing.

Overall inflation in the foodservice sector dropped in August 2018 due to a fall in meat and poultry prices against the same month last year, but prices are likely to rise again soon.

Shaun Allen, Prestige Purchasing chief executive, said: “Whilst the overall drop in inflation this month indicates positive news for operators, the outlook appears to look less encouraging, with the effects of the dry weather particularly on wheat and cereal crops looking set to add more upward pressure on food pricing over the coming months.

“The natural volatility within the supply markets experienced this year has proven to be challenging enough for our industry, and with more turbulent times expected as we head towards Brexit, it will be critical that businesses take a proactive approach to managing the future risks of inflation.”

Meat and poultry

Meat and Poultry has continued to decline since the spring, falling by 2.1% in August month on month, and by 5% year on year.

After a very dry summer more price rises are expected, with some reports forecasting a 5% increase over the next 18 months.

The recent decline in price is due to an increase in slaughter levels as the hot weather has significantly reduced grazing pastures, and feed stocks are likely to become increasingly limited, prompting farmers to take precautionary action to relieve demand for livestock feed.

Sugar

Sugar has continued to remain relatively low in price, with the index down 9.3% on August 2017.

Although prices are up slightly month on month, it is likely to be a seasonal movement and not necessarily reflective of the overall trend.

However, a 17 million metric ton surplus of sugar is predicted for 2018, and is likely to keep sugar prices low for the foreseeable future.

Breads and cereals

The long, dry summer of 2018 has affected wheat production across Europe, and the index showed a 4.3% increase on July’s prices.

Some predictions for exporters are estimating a drop in the UK’s wheat crop yield of 10% on last year, leaving a potential shortfall of 2.5 million tons.

Wheat is also likely to be redistributed as animal feed after the summer’s hot weather reduced the availability of natural silage, which will influence the predicted rise.

Fiona Speakman, CGA Client Director for Food, said: “Overall inflation in foodservice prices appears modest, but beneath the top line figure there is a lot of turbulence.

“Foodservice businesses must now be braced for more inflationary pressures through the remaining months of 2018, and stay alert to ways of mitigating the challenges.”