Inflation, the war in Ukraine, higher energy costs and increased demand are key factors that continue to push food prices to their highest levels in decades. Brakes Spring 2022 Market Update was recently published, and it breaks down several key food categories with details on pricing and the future outlook below.
The news may seem bleak but Enhance is confident that our team will be able to find alternative solutions that will keep your business competitive and profitable.
Global inflation reaches record levels as economic growth slows
In May the Office for National Statistics calculated that the growth rate of the UK’s Consumer Price Index had risen to 9%. This represents the highest level of inflation the UK has experienced in over 40 years, punctuated by increasing prices for both food and energy. Prices have been impacted by several poor wheat harvests, supply chain disruptions exacerbated by Covid-19 and Russia’s Invasion of Ukraine.
Rising production costs continue to hamper dairy production
Prices have been impacted by major outbreaks of avian influenza and salmonella in a number of key producing countries. Producers are also facing significantly higher input costs in 2022. The primary driver of this is feed which makes up approximately 60%-70% of the total production cost.
Rising input costs have hampered dairy producers in both the UK and abroad. UK cheese prices have been rising throughout the winter as milk yields declined, whilst demand from both retail and foodservice has remained high. Dairy prices often see a seasonal drop in spring when milk production peaks, however this has yet to be seen in 2022 due to the lower YoY supply levels.
Protein markets spike following the outbreak of war
Since Russia launched its invasion of Ukraine spot prices for chicken from Poland, the EU’s primary exporter, have increased 37%. Low supplies were already a challenge for the market with outbreaks of Avian Influenza throughout the winter removing large numbers of birds from the market. The outbreak of war however sparked a further surge in the cost of animal feed which comprises a major cost component for producers. Demand for chicken remains high and is expected to increase further as the cost of living crises starts to squeeze household budgets.
Prices for pork across Europe have seen a similar sharp spike following the outbreak of war. Livestock supplies were low going into the spring as prolonged low profit margins and export restrictions in 2021 forced farmers to send pigs to slaughter early or in some cases exit the market completely. Demand is now seasonably high as we enter the “grilling” season. However rising input costs continue to limit the supply side of the market.
Spot prices for cattle have seen a more steady trajectory of increase than other protein markets, however producers face many of the same challenges with prices now up over 60% since the January 21. EU Beef production in 2022 is expected to decline 1% as farmers continue to see their margins squeezed by rising production costs. Demand for beef is now expected to rise in the UK as we enter the summer barbeque season further supporting prices.
The price of Norwegian salmon has risen to its highest level in over 20 years with a near 150% increase since September 21. Prices have risen due to supply concerns following results of the Q1 harvest which showed salmon numbers had contracted 15,000 tonnes (-4.0%) YoY. High feed costs are also a concern with reports of under-nutrition and above average fish mortality rates in some regions. Finally reports indicate that Norwegian frozen inventories are at the lowest recorded levels in two decades.
How Enhance can help
Our purchasing experts are in contact with both national and local suppliers (including Brakes) on a daily basis, and we have a clear understanding of the current market. Whilst it may be difficult to pay less today than you were a month or two ago, Enhance is able to benchmark market pricing and find the best deals for our clients based on the current environment. We also offer bespoke tendering and gross margin improvement services that help customers reduce spend and improve their profits.
Why not contact us today and schedule a free consultation that will help us to identify if there are opportunities for immediate savings.