Price Points

Cost watch: what’s going up and what’s going down in February

David Read, Prestige Purchasing’s Chairman, takes us through the main moves in food prices in February.

5 February 2020
fruitmeatmeet the expertpoultrypricing

Meet the Expert

Who: David Read

What: Chairman

Where: Prestige Purchasing

 

Food inflation continues to ease with month-on-month price falls in many categories, and where prices are going up, they are often doing so more slowly than last year. Operators should be focusing on locking in costs savings with suppliers in this relatively benign market.

ONE TO WATCH! Which way will fish turn?

In recent weeks we’ve seen some respite in fish pricing as demand has dropped off after Christmas, but it remains to be seen whether the new quotas coming into the market for the new year will have the predicted effect of consistently easing prices further. Farmed salmon demand was at an extremely high level over the Christmas period as bad weather restricted deliveries of cod and haddock into the UK. Many industry experts are talking up the salmon market for the remainder of 2020, though we should bear in mind that a similar prediction was made last year, and the market delivered the exact opposite with record lows during the summer against a backdrop of other products hitting record highs. So, for now the best course of action is watch price moves very closely. When we see the trend for 2020 start to emerge, I’ll be reporting it here.

DOWN! Fruit is falling (for now)

During the winter months demand for fruit becomes sluggish, and in common with previous years, we are now seeing a seasonal drop in pricing. But do bear in mind that fruit prices across the board are still strongly up year-on-year, largely caused by lots of extreme weather through climate change, which has been damaging the growth and yield of fresh produce. As climate change increases in intensity we will see more challenges in this category as storms impact production, some fruit yields (such as grapes and bananas) potentially falling by a third through drought, and citrus fruits damaged by higher salt content in water caused by rising sea levels.

UP! Protein markets are building

There was the usual Christmas spike in the prices of popular meat and poultry lines over the Christmas period, but after a year of flatlining there are signs that protein markets may well stay firm in the months ahead. Many processors took extended Christmas breaks dropping slaughter numbers significantly, and it looks likely a number of other factors (African Swine Fever, Lost Australian lamb production, and coronavirus in China) will all have an inflationary impact in the months ahead on global markets. This could be a good time to fix prices for 2020.

ONE TO WATCH! Coronavirus and oil

Following the outbreak of the virus – which has killed over 400 people and infected more than 20,000 in China – the country’s oil demand is estimated to have fallen by 20%, according to Bloomberg. China is the world’s largest importer of oil, consuming up to 14m barrels each day.

On Monday (3 February), Brent crude prices dropped by 4% closing at $54.45 a barrel, down 24% on a January high. As a result, analysts believe OPEC and its allies may look to cut oil production by up to 1m barrels per day. This is in addition to a 1.7m reduction announced last year. This will bring an unwelcome level of volatility to oil markets, which play a key part in transport and packaging costs for food producers and suppliers.

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