Inflation
The inflation rate for October reached 11.1%, up from the 10.1% in September and the highest rate since 1981 [ONS]. This rise is most likely due to increases in gas and electricity.
The food industry has seen huge increases over this year with prices rising by one fifth [CGA]. All food categories have seen double-digit levels of inflation year-on-year. Dairy is up 19% and meat over 17% in comparison with 2021 [CLA]. The drastic effects on the industry have been exacerbated by soaring energy costs, staffing shortages and supply chain issues both locally and due to the conflict in Ukraine.
Meat & Poultry
Chicken:
The cost of chicken saw large increases over 2022. due to the soaring costs of feed as a result of the conflict in Ukraine and energy costs in processing plants. The severe outbreak of avian flu has put additional strain on the European poultry. Although there is significant strain, prices remain steady at the moment with no expectation for further increases.
Turkey:
Forty percent of UK turkey flocks have been lost due to avian flu, with geese and duck taking significant losses too. [Financial Times] There are warnings of shortages from suppliers for Christmas turkeys and prices are up 10%+ year on year.
Pork:
Pork prices have been fluctuating over the past two months after large increases in the first half of 2022. More recently, increases have slowed although pricing remains significantly higher year-on-year (54p/kg over 2021 levels. Although prices are steady, the cost to farmers remains very high whilst most producers are losing money on each pig sold [AHDB].
Beef:
GB deadweight prime cattle prices have slightly increased over October to 441.7p/kg. Prices remain considerably higher than 2021 due to the dramatic increases in fuel, feed and fertiliser costs seen throughout 2022. [AHDB]
Fish & Seafood
Ukraine Impact:
There is a large amount of uncertainty surrounding the fish market due to changes in quotas and tariffs introduced against Russia. Additionally, the high costs of fuel, packaging and labour result in higher prices required to cover overheads.
Salmon:
The amount of salmon produced in Norway has dropped compared to last year, which is likely to drive pricing up. Salmon costs were significantly higher in the latter half of October than previous years, most likely due to the increased costs of farming. Additionally, the Norweigan Government’s plan to introduce a 40% tax on farmers in January, 2023 is likely to affect supply and pricing. (Direct Seafoods)
Whitefish (Cod, haddock):
Cod quotas have been reduced this year which is likely to result in increased pricing. The conflict in Ukraine and Russia has meant that the USA have stopped importing cod and haddock from Russia, putting more pressure on the Icelandic market. Furthermore, trawlers are spending less time in the Russian areas of Barents Sea due to the dangers in Russia which may reduce supply from this area. (Smales)
Dairy Produce (Milk, Butter, Cheese)
The dairy industry remains under significant pressure as seen throughout 2022, however prices seem to have steadied through October and November despite high production costs associated with energy, labour and fuel. There has been a record high production of milk in October up 2.5% from September and 3% on last year. The favourable temperatures and rain fall in Autumn has resulted in much more grass growth than previous years which has benefited dairy production [AHDB].
Month-on-month there have been steady changes in costs across dairy. Low-fat milk has increased 47.9%, butter 29.7%, and cheese has gone up 27.1% this year. The farmgate milk price increased again in September, up 3.8% from the previous month, reaching 48.86ppl. This brings a total increase of over 50% of all UK milk products compared to 2021 pricing.
Eggs
Warnings of egg shortages continue due to farmers reducing the size of flocks or leaving the industry altogether. Eggs have risen nearly 45p on average with 10p or less being passed on to farmers – not enough to cover the huge rises in cost of fuel, feed and transport. [The Guardian]
Moving into December, retailers are limiting the number of packs of eggs per customer and wholesale suppliers are reporting on short deliveries from suppliers of processed egg products (liquid egg, scrambled egg). Pricing is expected to remain firm into Q1 of 2023.
Fruit & Veg
Potatoes:
Potato yield is down 25-30% over last year with larger grades being in short supply. Although the supply has fallen, price increases slowed in November but are expected to slowly rise over the coming months. This will undoubtably have an impact on processed potato products early in 2023.
Tomatoes, Cucumbers, Peppers:
The fears of difficulty sourcing salad vegetables from EU suppliers seem to have materialised as predicted. With Dutch temperatures beginning to drop and suppliers facing the enormous rise in energy costs, the prospect of heating greenhouses will mean increased pricing. Availability will be boosted by the upcoming Spanish season, however, pricing is likely to be higher than previous years due to the high costs involved in transport [Total Produce].
Other Veg:
Carrots and parsnips fared slightly better than potatoes this year, similarly larger crops will be harder to come by and costs may increase as demand increases. Cauliflower and broccoli suffered in the UK this summer because of extreme temperatures, leading to French and Spanish imports that will ensure higher prices over the winter season.
Beverage
Soft Drinks:
Shortages in glass has disrupted the supply chain for market leading suppliers such as Coca Cola (CCEP). Stock shortages of all ‘Icon’ bottles are being reported and it is recommended operators switch to cans and/or smaller serve bottles in the short term when possible.
Beers & Ciders:
Rising production costs from increased energy bills and CO2 coupled with ongoing increases in transportation costs are forcing brewers to pass on increases to customers. Some suppliers are indicating that increases of around 15-17% will be passed onto customer in the New Year.
Wine:
Delays in customs clearance are resulting in shortages on some vintages where wholesalers do not have sufficient bonded storage for buffer stocks. A prolonged weak value of sterling could have long term implications for products imported from overseas, coupled with any post-Brexit tariffs. On a positive note, early indications are suggesting that the hot, dry European Summer of 2022 will yield bumper crops for many European winemakers. For example, 2022 was the sunniest year in the history of the Champange region.
Non Foods Products
Paper and Cardboard:
Rising costs of raw material used in paper and cardboard production coupled with increased energy costs have resulted in paper & cardboard prices increasing 25%+ in the last 6 months of 2022. Increased energy costs are likely to be a significant factor for pricing in the first half of 2023.
Glass, Crockery and Ceramics:
Energy hungry industries such as glass and ceramics manufacturing are facing significatn increases in utility bills, resulting in price increases of finished products being passed onto customers. Many manufacturers in this sector are planning further increases early in the New Year; for example Churchill and Utopia crockery & glassware.