Operators hit as food costs soar

28 June 2013 by
Operators hit as food costs soar

Buyers are paying for last year's bad weather with dramatic rises in cost of butter, fruit, vegetables and salmon. James Stagg reports

Food inflation is continuing to track at over 4%, with categories such as butter, vegetables and salmon rising in cost dramatically and increasing the pressure on stretched operators.

According to the latest Prestige Insight market report fruit inflation has been at over 10% for the last four months, while vegetables are tracking at an 8.6% increase compared to last year.

Beef and potato prices also remain exceptionally high, with supply exceeding demand across the board.

Christopher Clare, head of insight at Prestige Purchasing, said that bad weather in the winter meant that farmers had to use extra feed for cattle due to the poor grazing.

The cattle are also taking longer to finish so farmers are struggling to keep up with demand," he added. "We think that until around August the prices will stay fairly high."

Meanwhile, operators continue to feel the effects of last year's disappointing potato harvest. Clare said: "Plantings have been a bit late this year because of ground conditions too so we're expecting this year's crop to be a bit later than usual. Prices won't come down until late autumn and only then if there's a good harvest, which is too early to say."

One of the most significant rises is for butter, which went up 25% in price between February and April and has remained at the higher level ever since. Production of milk is lower than average, forcing up the price of butter and cheese.

Just as striking is the rise in cost of salmon. The price of Norwegian caught salmon has increased by 60% compared to last year.

"Back in 2011 warm sea temperatures meant there was almost 20% more salmon available so pricing went down and there was loads of promotion, increasing demand," Clare explained.

"Now the sea temperature is more normal and so output has stabilised but the demand remains," he said.

Overall food inflation is up by 4.4% and Clare predicts it will continue to track well above the Consumer Price index.

He said: "The real drivers behind it are the macro factors which haven't varied too much: growth in population, pressure on producer costs, climate change or variability and rise of investment in the commodity markets for food."

Potatoes The price of frying potatoes has fallen between 2.2% (Maris Piper) and 11.4% (Agria) in the last month. Markies currently provide the best value for money. But with supplies short, prices stay high year-on-year and will do, at least until this year's crops are ready in late autumn.

However, the cost of grade 1 potatoes remains high, with prices rising again this month. Maris Piper potatoes were particularly dramatic, rising 7.4%. Prestige advises that Desiree are the most cost efficient at the moment.

Vegetables The market has fluctuated over the past month, with asparagus varying by 12% and aubergines by 18%, but the month ends much like it began.

As beetroot comes into season its price shoots up, and it has risen 40% in May. Cucumbers have dropped by 25%.

Fruit The majority of apple varieties have gone up in price this month with Bramley (18.2%), Red Delicious (13.6%), Braeburn (8.3%), Pink Lady (5%) and Granny Smith (4.2%) all taking a bite out of food budgets. Cox's, Golden Delicious and Royal Gala apples have all remained stable.

As locally grown strawberries come through, the price becomes even tastier, dropping 52%. The same cannot be said for raspberries, which are taking their time to sweeten.

Banana prices fell in May after a 16% increase in April, though threatened strike action in Columbia could drive them back up again.

Beef Month-on-month prices have again seen an increase, though prices are reported to have softened in the last two weeks. However, the overall trend is upwards as the prices of steer (0.5%) and heifer (0.8%) are still increasing.

Lamb Lamb prices in the UK have gone up this month by over 8%. This is a result of an oversupply of old season lamb, where prices are higher, delaying the switch to new season lamb.

Pork Pork prices have gone up 1.7% in the past month as buyers forward order in preparation for the expected demand for summer barbecues.

Chicken Chicken prices peaked in May, reaching heights of £1.31/kg, but June has seen these prices start to soften again. Since the turn of the year, prices are up 7.5%.

Dairy High milk prices are maintained by processing costs. This has kept butter prices high and, though it decreased slightly in the last month, it has still gone up 26% in the last six months.

Fish Cod and haddock have gone up considerably in the last month: 30% and 26% respectively. Pollock remains the most affordable choice in the category.

Mackerel's improved Marine Conservation Society status has pushed up prices by 25%. Sardine prices have gone up 35%.

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