5 key factors that will impact UK food service this summer

The busy summer months and holiday season will be upon us in no time, and we want to ensure your success. Keeping informed on the latest market conditions is paramount to planning ahead and making the best business decisions.

We would like to share some information provided in Brakes Spring Market Update. This leading UK wholesale foodservice supplier has identified five key factors that will continue to impact UK food service businesses throughout 2021.

Driver shortage for UK food service sector

The UK food service sector is facing the additional challenge of a serious shortage in the number of HGV drivers in the industry – an estimated shortfall of 70,000 drivers principally caused by the combination of Brexit and the pandemic.

This shortage is causing significant disruption for the industry, causing suppliers and wholesalers to increase wages and incentive schemes in order to secure drivers. Suppliers are pushing to pass these increased costs onto supermarkets and wholesale providers, which ultimately means higher food costs for consumers.

Shipping costs soar

Leading shipping companies warn that historically high shipping costs will last into 2022. The pandemic has led to significant changes in global supply and demand.

As we move into the summer period more European countries are expected to ease lockdown restrictions which is likely to increase demand for consumer goods and put further pressure on shipping costs. These high costs impact the prices of many agricultural commodities and will lead to increased costs of food across Europe.

Vegetable oil prices reach record highs

Commodity prices for rapeseed oil in Europe have increased over 80% in the last 12 months due to upward pressure from a decline in global supply, with EU rapeseed production falling to 16.8 million tones in 2020, a 14 year low. This shortage in production increases EU dependence on Canadian imports which are seeing prices top 12 year highs as stocks drop to 16% below the 5 year average.

High commodity inflation for the other key vegetable oils with sunflower, soyabean and olive oil all show increases over 50% in the last 12 months.

Fresh chicken shortage

Commodity prices for EU chicken are rising sharply in 2021 due in part to the ongoing pandemic and associated economic downturn has resulted in a significant uptick in demand for chicken.

Additionally, an outbreak of Avian Influenza in Poland, the largest EU exporter, has forced farmers to slaughter over 35 million birds in attempts halt the spread. This has taken significant volume out of the market and pushed prices up over 25%.

Input costs of production are also having an impact as the cost of feed has risen over the past year and European exporters are facing additional haulage costs post Brexit.

Increased dairy prices

Europe experienced a slow start to its milk production season as cold weather limited output, resulting in a production decline for the main categories of milk products.

Butter has been particularly impacted with prices rising 17% in Q1. Increased activity from the food service sector is creating greater demand which may push market prices even higher. The average price of European milk rose by 3% over the winter with prices supported by strong export demand from Asia and Middle Eastern markets.

However, production is currently forecasted to be broadly inline with 2020’s output, which could result in softer milk prices over the summer.

 

As always, our team is here to assist with your purchasing needs. Please contact us with any purchasing needs you may have.