A report from Logistics UK (formerly the Freight Transport Association) says that 71% of UK logistics companies have experienced sharp increases in costs during the first quarter of 2022. The primary cause is the rise in the cost of diesel, although there are significant issues associated with cross border road and air freight. This situation is unlikely to change in the near future.
With the ongoing war in Ukraine continuing to impact grain and feed prices and the cost of living crisis affecting both retail and hospitality demand, the costs of getting food from farm to fork is likely to come under increasing pressure.
Britain’s official rate of inflation hit a 40-year high of 9% in April and is forecast to surpass 10% later in 2022.
Food price inflation in Britain is likely to peak at up to 15% this summer and will remain at high levels into 2023 [Source: Reuters].
Meat & Poultry
Great Britiain’s deadweight cattle prices have continued to rise, building on already record prices. This puts the measure up over 30p compared to a year ago and 72p above the five-year average.
After a period of stability, prime cattle prices have begun to climb again in June, reaching new record levels.
According to the Bureau of Labour Statistics, meat costs are about 20% higher than in 2021 and analysts expect prices to rise before any downward movement. [Source: AHDB]
Poland is the largest poultry exporter to the UK, accounting for 20% of all poultry imports, but The Polish Government have now reduced the exports of poultry, in favour of keeping what they have internal for dispersal amongst their own population as well as the new refugees.
A new case of highly pathogenic bird flu has been confirmed in Shropshire, making it England’s 98th case of the virus since October 2021. All birds on the infected premises will be humanely culled, and a 3km Protection Zone and 10km Surveillance Zone have been placed around the site. The new case renews concerns as it comes just a few weeks after the government eased the UK’s mandatory poultry housing order.
With feed prices continuing to rise, and no indication that they will be dropping anytime soon, prices remain high. With pig producers experiencing negative margins since October 2020, it is estimated (based on the total pig slaughter numbers to April 2022) that the industry has lost over £500m during this period.
In addition, slaughter numbers are down, not helped by abattoirs closing for at least one of the bank holiday days for the Queen’s Jubilee.
The average price for all prime cattle (steers, heifers and young bulls) sold deadweight in GB continues to increase up as much as 33p above the same period last year.
Estimated slaughter of prime cattle in Great Britian is down 6% from last year, with reports of staffing shortages at slaughterhouses.
Similarly beef prices have shown some downward movement, but total cattle (prime and older prime) is still approaching 20p more per kg during the same period last year.
Liveweight lambs prices are still 30p up from 2021.
Fish & Seafood
Norwegian salmon prices have reached their highest in over 20 years. The combination of reduced processing of fish and high demand from Asia has sent salmon prices to record highs. Although some stabilisation is expected, base prices will remain elevated.
It is also possible that Scottish salmon will come under threat of retaliatory tariffs in the wake of the new legislation aimed at overriding The Northern Ireland Protocol of the Brexit Deal.
The market for frozen whitefish is seeing pressure on price driven by several factors. Firstly, the quota on cod from the Barents Sea has been cut by 20%. Secondly the processors are facing higher production costs caused by labour cost increases, higher utility costs and increases in the cost of distribution.
Fresh markets are being affected by the lack of supply in the frozen market. Russia are responsible for around 40% of Whitefish landing’s yearly. The lack of supply will keep prices high during a period of time we would normally expect pricing to be lower. The longer the conflict continues, the more of a pricing impact we will see. [Source: MJ Seafood]
Great Britain’s milk production could fall between 0.8% and 5.3% depending on what happens to feed prices, availability, and milk prices. The reduction in supply is likely to be reflected in higher milk prices.
The dairy sector has been hit with severe increases in processing costs including energy, labour, raw materials, maintenance, storage and depreciation. These cost increases came primarily from the sharp increase in energy prices (gas and electricity) seen in Q4 2021. Also, the cost of drying powders has been particularly affected.
Prices for all key dairy products have been increasing steadily this year, and it is expected this will continue until at least late summer/early autumn as supplies remain tight. UK wholesale prices have continued to reach five-year highs. [Source: AHDB]
Staff shortages are still being experienced across the UK, particularly in industries that previously relied on migrant workers such as agriculture and meat processing. This shortage has led to increased wages offered to attract skilled staff.
The driver shortage crisis that peaked last year, although stabilising, has left the industry with higher wage costs that were offered to recruit drivers in 2021.