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Foodservice Price “Uncertainty” Ahead

Year on year inflation in wholesale foodservice prices climbed to over 6% in November, the highest point of 2018, the latest edition of the Foodservice Price Index from CGA and Prestige Purchasing reveals.
foodThe Index was pushed up by the Milk, Cheese and Eggs category, where year on year inflation sat at 13%. The highest numbers of November were within the Fish and Oils and Fatscategories, both of which saw prices hold relatively firm in the second half of 2018. By contrast, the Sugar category saw sharp movement in the opposite direction, with year on year deflation of 12%, mainly due to overproduction.

In the dairy sector, healthy grass growth has helped the UK’s milk production to remain relatively strong despite harsh weather earlier in 2018. However, farmgate milk prices have continued to increase, and there are some concerns for production over the coming months, with silage forecast to run short. Demand for eggs is expected to increase in the UK, following a revision of Food Standards Agency guidelines on the consumption of raw and runny eggs.

The Fish category of the Index has continued a trend of significant year on year inflation. Although there was a small month on month decrease in November, Barents Sea fishing quotas and heavy demand for salmon in the run-up to Christmas means this downward movement is unlikely to continue

There is a similar trend in the Oils and Fats category of the Index, with very high inflation year on year and a slight fall month on month. This was helped by a decline in UK wholesale butter prices after a period of high and volatile prices, and an improvement in the EU availability of butter following overall strong global milk production in 2018.

The Index also indicates that the downward trend in sugar and confectionery prices continues, with a 12% decrease year on year in November. Cocoa farmers have received welcome news from a 20% raise in the minimum price paid for Fairtrade cocoa.

In the Vegetables category, UK shortages of some items have continued to push up pric

es, with potato shortages also now having a knock-on effect on the prices of manufacturers of crisp and chip products.

Shaun Allen, Chief Executive of Prestige Purchasing, said: “These latest inflation figures show how volatile the supply markets continue to be within the foodservice and hospitality sector, and it is only anticipated to become more challenging as we head into 2019 with the outcome of Brexit still to be determined. It is crucial that businesses take appropriate measures and actions to manage the future risks of inflation.”

Fiona Speakman, CGA Client Director – Food, said: “As 2019 opens, the latest figures from the Foodservice Price Index are a reminder if it were needed that inflation will be a major challenge for the foodservice sector over the next 12 months. Indications of deflation in sugar-related categories are more than offset by high inflation in key areas like fish, dairy, oils and fats, and with more turbulence in supply on the horizon businesses will need to stay right on top of market developments and trends.”

The foodservice sector has been challenged by relatively high levels of inflation throughout 2018, and as the year draws to a close the upward trend shows no sign of abating. Weather patterns have worked against the supply chain, and micro factors like the soft drinks industry level and trade tariffs have made conditions even tougher. Businesses will be hoping for a more stable 2019, but the ongoing effects of the weather on production coupled with the shadow of Brexit means further uncertainty is more likely.”

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