A possible Brexit, the National Living Wage and the migrant crisis are all negatively affecting prices for summer, according to the Lynx Purchasing Market Report. So it pays to be forewarned and forearmed about what to buy when, says John Porter
Uncertainty over the UK's future in Europe is affecting the price of fresh produce, with the implications of a potential Brexit hitting confidence at key points in the supply chain.
In the run-up to the referendum on 23 June, buying specialist Lynx Purchasing has taken soundings from its key suppliers for the summer 2016 edition of the Lynx Purchasing Market Forecast. This shows a range of factors that are combining to put upward pressure on the prices paid by caterers.
"Both the city and the supply chain thrive on certainty," says Rachel Dobson, managing director of Lynx Purchasing. "There are clearly very strong views in both camps as to whether Brexit would be good for the UK in the long term, but there's no doubt that the debate before the referendum is having an impact."
Factors related to this which are causing challenges for suppliers include:
- The weakening of sterling against both the euro and the dollar. This has an effect on imports both from Europe and further afield. Summer salad produce, such as tomatoes, lettuce and cucumbers, is mainly imported from Europe, and more pork is also being imported as UK production declines. Key commodities, such as coffee and bananas, are traded in dollars, which also pushes up the prices paid by caterers.
- The availability and cost of labour. The introduction of the National Living Wage in April has increased labour costs, which are significant in an industry which has to work on low margins. Producers rely heavily on migrant labour from the EU for seasonal work, such as picking and packing, and are worried about the longer-term availability of these workers and the effect on costs.
- Increased transport costs.
"We are fortunate in that these price increases are coming at the end of a very benign period for inflation," says Dobson.
"Prices are building back up again from a low base, which gives operators time to plan. However, we expect a return to inflation later in the year, regardless of the outcome of the referendum, and we advise all operators to look carefully at their costs."
Beef prime cuts for steak and on-trend barbecue cuts, such as short rib and brisket, are approaching their seasonal peaks, so prices are expected to creep up. Sirloin remains a great value cut, but even this is on the rise.
New season British lamb is excellent quality but is approaching peak demand and price, and the weaker pound has increased the cost of imported lamb.
Salmon is seeing high prices at present and this is expected to continue throughout the summer. Some smaller European farmed salmon were culled due to a lice issue in late 2015, meaning less fish at the relevant size for foodservice. South America has experienced a similar issue, driving American buyers to European fish.
As cod quotas come to an end from June onwards, operators who can vary their menus to make the most of the different species caught off the British coastline will see the price benefits. Fish with high quality and good availability should include hake, pollock, mackerel, lemon sole and plaice. Native lobster and crab should also be in plentiful supply.
For crops such as berries and salads, labour accounts for a large percentage of the final product cost, making the impact of the National Living Wage a significant factor. Beyond this, other areas highlighted include:
The mild winter and limited rainfall has led to farmers across Europe having to harvest many crops up to 30 days ahead of schedule. Much of this oversupply has been poor quality at times, which has affected availability.
On the citrus front, lemons will be particularly challenging during the first few months of the summer, due to an estimated 30% reduction in Spanish volumes. Fruit from the Southern hemisphere is due to start in mid-July, but will be affected by the stronger dollar. Limes have had a good year, but exchange rates have eroded the benefit.
Global demand continues to increase for avocados. US demand alone has quintupled in the last 15 years, while year-on-year sales in the UK have increased by 25%. A severe shortage of avocados in both Israel and Spain has left a huge supply gap, while South Africa is predicting a 40% reduction due to hail damage. An avocado tree typically takes five to seven years to yield commercial volumes, so additional supply cannot be turned around quickly.
The overall quality of last autumn's potatoes in storage is of concern, with rot becoming more commonplace. Cost increases in both good quality raw material and prepared potatoes is likely before the new season starts in late summer.
Dobson adds: "As always, the Market Forecast shows a mixed picture for caterers as they plan menus. There are some challenges ahead, but operators who can go with the flow and work with suppliers to get the best availability, price and quality, will have the advantage."
The Consumer Prices Index (CPI) rose by 0.3% in the year to April 2016, down from 0.5% in the year to March. Most core food items showed a decrease, with the main exception being oils and fats, up by 3.3% according to the CPI measure.
The more detailed RPI inflation measure shows a significant increase in the cost of eating out in the month following the introduction of the National Living Wage:
- Hotel, restaurant and pub meals: +2%
- Business, industry and workplace meals: 1.1%
- Takeaway meals: 1.9%
About Lynx Purchasing
Lynx Purchasing works with more than 2,200 customers and offers a free, no-contract service that enables businesses to buy the highest-quality products and services at the most competitive prices.
Lynx is an effective and experienced team of purchasing experts who help hospitality and catering businesses buy better, manage their costs and operate more profitably. Lynx already works with a wide range of catering businesses, including hotels, restaurants, pubs, care homes and the education sector.
To download the free Lynx Purchasing GP Calculator App, endorsed by the Craft Guild of Chefs, search for GP Calculator in the iTunes store or on GooglePlay. You can also keep up to date with Lynx Purchasing through Twitter @lynxpurchasing. Working with Lynx could start saving your business money straight away. For more information, call 01325 377845, email email@example.com or visit www.lynxpurchasing.co.uk
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