Operators advised to prepare for further food and drink price rises in 2013

19 December 2012 by
Operators advised to prepare for further food and drink price rises in 2013

Operators are being warned to prepare for further food price rises in 2013, as inflation for meat and vegetables continues to soar.

According to Prestige Purchasing, the price hikes experienced in 2012 due to low yields caused by unpredictable weather will continue well into 2013. Its annual Food Inflation Report predicts that food and drink inflation will increase by a third in 2013, from 3.3% to 4.5%. The rate of inflation for vegetables, which have been hard hit due to poor weather, is expected to rise beyond the 5.5% experienced in 2012.

Prestige Purchasing chief executive David Read said: "What we're seeing is a surge in food inflation, which will continue into 2013. We may even in due course be heading back towards 2008 levels where food inflation peaked at over 8%."

Summer harvests in 2012 were badly affected by the weather, with a dry spring affecting planting and a wet summer damaging root vegetables in particular. Wheat and grain prices are also high and increasing, which not only affects the price of bread but also protein as animal feed represents half of the cost of the beast.

Farmers are beginning to offset some of the rises by moving into soya feed rather than traditional wheat feed, but much still depends on the predictability of weather in 2013.
Read added: "I would expect that it's unlike that we'll have quite such an unpredictable weather pattern in 2013. It could happen but typically in the past it hasn't happened that way. But many of the other long term drivers such as population growth, production costs and the driving of the commodity markets by speculators, aren't going to go away and will continue to drive inflation, though they'll have a bit more predictability about them."

To mitigate the effect of price rises operators are advised to plan menus ahead and attempt to fix prices in markets that are expected to firm up.

Read said that multi-site operators have some big opportunities. "They don't have to buy everything from wholesale; they can start to control the distribution of their products and talk direct to producers and manufacturers," he added. "That is a good way to ensure you mitigate cost increases."

Key price changes

Pork prices are expected to rise steadily and push up meat prices, driven by a hike in feed costs and EU farming reforms.

A poor harvest has pushed up potato prices. This has contributed to inflation in the vegetable category.

Alcohol and soft drinks Historically the rate of inflation has been 1-3%; in 2012 it reached between 3% and 4%.

Breads and cereal Inflation is lower than expected for breads and cereal at 1.3%, but is set to increase due to the poor grain harvest in 2012.

Oils and fats Oils, particularly rapeseed oil, are at 1.1% inflation and expected to fall further due to high stocks and the high price of grain driving producers to use soya feed, a by-product of which is soya oil.

Milk Milk prices are expected to rise as hard hit farmers push some of the cost burden downstream.

Poor UK harvests because of wet weather will drive up food >>Hospitality must prepare for more increases in food and drink >>Operators take hit on margins as meat prices soar >>](http://www.caterersearch.com/Articles/10/08/2012/345247/operators-take-hit-on-margins-as-meat-prices-soar.htm)
By James Stagg

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