Market Report – Winter 2024

by | Feb 19, 2024

OVERVIEW

From the highest annual food inflation rate in over 45 years (19.2%) recorded in March 2023, inflation in the year to December 2023 slipped to 8% * [Source: ONS Feb ’24], a welcome start to the New Year. Whilst this reduction is welcome to all in the industry, world events in the first few weeks of the New Year such as the Houthi attacks in the Red Sea are threatening to slow the gradual decline in the headline inflation rate in Q1, and it is expected that the CPI inflation rate will be around 2.8% by the end of 2024. 

Other factors affecting the rate include the increase in the living wage (effective April), new post-Brexit port checks (effective 31st January), and the ongoing conflict in the Middle East; all of which are expected to impact on the cost of food in the coming months. 

*Core Inflation Rate (excl. food & energy) 4% [BoE Feb 2024] 

KEY CATEGORY INSIGHTS

Dairy & Eggs

Dairy

With the loss of just over 5% of producers in the UK market, year on year milk production is down by around 2% compared to 2022 volumes. This contraction of available raw material has led to less availability of milk derivatives – butter & cheese (cream production increased slightly). This reduction in the supply chain is expected to keep pricing for dairy produce firm. [Source: MINTEC] 

Eggs

Avian flu has hit poultry farmers hard over the past two years throughout the World, with many producers leaving the market after flocks were decimated, (estimated around 48 million birds were culled in Europe and the UK since October 2021), causing a restriction in the supply chain. The threat of more outbreaks of Avian Flu is still real and will continue until around March when most migration has happened.

Meat & Poultry

Beef

Higher demand for beef in December (6% year on year) has resulted in a constricted market, and despite more cattle being processed leading up to Christmas, supply remains tight amid a strong foodservice and retail market. Irish beef was less expensive than UK prior to Christmas but has since increased due to reduced slaughter numbers. Pricing is expected to remain firm throughout 2024.  [Source: MINTEC] 

Lamb

The new trade deal with Australia has seen increases in imported lamb & mutton in the UK market. This increase in imported meat will continue throughout 2024, with the impact on prices for domestic product unclear. [Source MINTEC] 

Pork

High demand in December led to a shortage of pigs. Poor weather conditions and reduced breeding is expected to push pricing up in the early part of 2024. 

Bacon

Labour shortages, increasing farming costs (feed, energy, labour), and supply chain disruptions have all kept prices high, although stable towards the end of last year. The market is still expected to be faced with these cost challenges, but has adapted to more efficient methods of production, which is anticipated to help stabilise pricing, 

Poultry

Production & pricing are expected to remain stable during Q1 of 2024, with seasonal increases expected in April due to increased demand. The EU deadweight price for chicken remains stable, although around 20% higher than January 2022. Additional costs incurred due to the introduction of health certification for all imports into the UK from January 2024 will however increase operating costs and therefore pricing is expected to remain firm. 

FIsh & Seafood

White Fish

As more countries seek to cease supply from Russian caught fish this year due to the ongoing war in the Ukraine, the supply chain is likely to remain volatile in 2024. The ongoing Houthi attacks in the Red Sea is also affecting the processing costs of white fish processed in China. A US ban on Russian seafood was issued in December 2023, giving processors 60 days’ notice, so further pressures on pricing may be experienced as US markets look to alternative markets. 

 Salmon

Salmon (both Scottish & Norwegian) is expected to experience shortages in H1 2024, with increases in water temperatures affecting the Scottish fish, and an increase in government taxes affecting medium/small farms, causing them to close before new taxation comes into play. Surplus Chilean stocks may see price competition in the market as it pitches against both Norwegian and Scottish product during 2024. [Source: MINTEC] 

Prawns

Surplus supply of warm water prawns, driven by Ecuador, has resulted in pricing reduced throughout 2023 with other supply markets forced to follow suit. On the other hand, the Canadian harvest has fallen short, meaning that larger sizes are experiencing increase in pricing. Pricing on smaller sizes is expected to remain low due to a bountiful supply.  

Produce

Frozen Vegetables

The cost-of-living crisis has seen a move from fresh veg to frozen in a bid to reduce costs however, recent extreme weather (extended drought in Spain and flooding in Northern Europe) has caused increases in costs of what were historically stable prices. Processors are warning of pricing remaining high with uncertainty surrounding the weather during the optimum planting season. 

Fresh Vegetables

These conditions not only affect frozen produce, and it is our recommendation to move to ’seasonal vegetables’ on any new menus to allow product switches and avoid extremes in pricing due to external factors. 

Potatoes

Exceptional rainfall and flooding during harvesting has resulted in losses of around 8% of the UK & European crops; and in Northern Europe, around 7.5% of the crops were unable to be harvested following sharp frosts on flooded fields. Supply is therefore expected to remain tight and prices firm with more increases expected in May/June. 

Chips 

A shortage of supply of potatoes for processing may see supply challenges as we head towards the summer months, this will result in increased prices of chips and other processed potato products and some less popular sizes may be dropped in favour of volume lines. [Source: MINTEC] 

Tomatoes

Despite an increase of 5% in the Italian growing areas last year, production was down last year 1.3% on 2022 volumes caused by extreme weather with some key growing areas in the region experiencing abnormally high temperatures and hail in the same growing season. 

Some growers reported losses of up to 60% of the harvest. In addition to this, processing costs increased due to higher labour and raw materials; both factors have contributed to the cost per metric tonne of vine tomatoes more than doubling since August 2023 [Source: MINTEC].  

Poor ROI for farmers has seen many switch to more profitable crops, adding to the pressures on tomato pricing. [Source: MINTEC]

Wheat

Reduced demand for wheat in Q3/4 of 2023 allowed manufacturers to secure stock for production until around February 2024, resulting in declining prices in Q4 last year. Wet weather in the key growing areas of Europe so far in 2024 may mean that planting is delayed which could have an impact on wheat-containing products later in the year. 

Pasta

From June last year, the price of Canadian durum wheat (50% global production) has surged from £280/MT to a high of £400/MT in August, settling back to £360/MT [Source: MINTEC] at the end of January. As durum wheat exports from Russia are effectively ‘off limits’ to most of the Western World, the Canadian raw material has no counterbalance for pricing, durum wheat pricing is expected to rise significantly in 2024. 

Rice

With a very small proportion of the worlds rice harvest exported (11%), extreme weather conditions in Asia last year could have a negative effect on rice exports as they seek to ring fence for domestic consumption. Many rice producing countries have already had temporary export bans on some varieties and prices have increased by almost 50% since January 2023, to the highest levels for more than 15 years. 

Sugar 

Although a spike in raw material saw sugar prices spike in Q4 2023, pricing has dipped to levels close to those of January 2023. Despite this reprieve, damage to crops from wet weather in the growing areas of Europe, is likely to keep pricing firm. 

Oils

Sunflower Oil

Last year saw a downward trend in sunflower oil pricing after the huge hikes following the Russian invasion of Ukraine; because of prices falling, farmers and oil crushers have scaled back sales to move prices back up, despite production reportedly up almost 10% on the 2022 figures. 

Rapeseed Oil

As the supply of sunflower oil recovers, rapeseed oil has been reducing in prices since the beginning of Q4 last year. World production has increased, and prices are expected to remain on a downward trajectory in the early part of 2024. 

Soy Oil

Whilst crops in Brazil (largest producer) have been affected by heatwaves and drought, prices of soy oil are expected to remain stable as consumers switch to sunflower and/or rapeseed oil. 

Olive Oil

MINTEC reported that olive oil prices are at an all-time high since they began recording market data. All growing regions in Europe have reported extremes in temperatures, with Greece experiencing around a 30%-40% loss of the 2023 harvest, and Italy forecasting the lowest production levels for five years. Demand for EVO has switched somewhat to blended with Pomace seeing a 70% increase in demand. To add to this restriction in supply and increase in costs, Greece has banned olive oil exports to protect domestic supplies; this may have further impact on imports into the UK and subsequently pricing throughout 2024. 

Beverages

Fruit Juices

Cirtus Greening (an incurable disease affecting citrus trees) has affected almost 40% of Brazilian orange plantations; as Brazil accounts for around 75% of world supply, prices increased dramatically in Q4 2023, and are expected to remain high throughout 2024 as manufacturers contract raw material at higher prices. 

It is expected that all fruit juices will experience price increases as consumer switch from orange.

Beers, Wines & Spirits 

Consumers continue to be squeezed by the cost-of-living crisis, hitting frequency and spend, as well as the drinks categories they consume. However, consumers are not compromising on quality, instead cutting back on volume and a vast majority see on-trade visits as the treat they most look forward to. 

At a UK level, Spirits continues to be the biggest struggler against last year as consumers cut back on higher-tempo occasions, as LAD, softs and wine all gain share.  Draught world Lager continues its growth on the back of more casual occasions, as does stout, whilst on-trend rose wine is a particular winner in the wine category. High-tempo categories like tequila, vodka and liqs and specs driven decline in spirits, as does gin, whilst rum and whisk(e)y perform better. 

In Scotland, all categories see value growth, with spirits actually stealing share. In beer, the dominant standard lager category continues to grow although is coming under pressure from world lager, whilst premium lager is the biggest loser. All spirits categories are in growth, but whisky and rum see the best performance as in GB, with malts have now overtaken imported. American and Italian wines see the most growth as Pinot Grigio, Zinfandel and Prosecco all perform well. 

Non-foods

General 

After a turbulent period of increasing manufacturing costs (energy, transport) pricing had stabilised somewhat for the majority of 2023 however, the Red Sea attacks in November and continuing threat of attack has led to increased shipping costs as sea freight is rerouted via Cape Good Hope. 

Supply chain issues may become prevalent as we move through 2024 with shipping containers being in short supply (wrong place at the wrong time), and lead times are expected to increase for goods imported from the Far East (estimated additional 10 days).  

Chemicals

Raw material costs have seen little change over the past 12 months, with the main impact on prices stemming from increased costs in transportation, energy costs and rises in the National Living Wage. 

Paper Products

Good supplies of raw materials have ensured that finished goods pricing has remained stable. 

Equipment

As much of the equipment we buy in the industry is imported, the Red Sea attacks are having an impact with shipping companies imposing force majeure costs onto Importers.  

Disposables

As more countries impose bans on single use plastics, this category is very much in focus. As with many non-food categories, much of the product we use is imported and will travel from the Far East to European markets and so will be affected by the ongoing situation in the Red Sea. At the time of writing, we do not have any indication of the extent of the situation on pricing to the industry.