Price Points

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

Prestige Purchasing’s chairman, David Read, gives you a glimpse into the financial future.

5 June 2019
dairymeatmeet the expertpricingseafoodsugar

Meet the Expert

Who: David Read

What: Chairman

Where: Prestige Purchasing

 

For the first month in a while we have seen a small month-on-month drop in price for the full basket of food, and food inflation (which compares the cost of food with this time last year) is thankfully continuing to ease back to more acceptable levels. 

DOWN! Fish returning to calmer waters

Such is the extent of the crazy climb of fish prices in recent months that we are still looking at double-digit year-on-year inflation percentage, even though the prices are down month-on-month by a similarly high percentage. But before you crack open the Chablis, be aware that salmon yields are expected to fall dramatically in Norway due to an algal bloom, with 10,000 metric tonnes of fish killed so far.

On the plus side, Russia and Norway expect to increase quotas for white fish landings in the Barents Sea in 2020 as stocks of cod in the body of water are currently the healthiest in the world, prompting the desire to increase landings for next year. Should quotas be raised, we can expect a return to more normal white fish prices next year. For the moment, prices will ease only slowly.

UP! The Chinese are out shopping for meat

Last month I reported that African swine fever is affecting pig production in China, pointing out that the disease is limited to wild and domestic pigs, so there is little danger to other species.

There is speculation that China may have to cull up to 100m pigs by the end of the year. As a result, we are already seeing increased import demand from China for both pork and other meat products. Whilst global cattle prices are currently steady (pork having already risen substantially), increased demand from China has caused fresh and frozen beef exports from Argentina to rise in recent months – over 40% in comparison to 2018.

So, I need to announce a correction: if the swine fever situation continues in China, I think we can expect ALL meat prices globally to rise.

DOWN! Milk on the turn

Milk production continues to increase more than the seasonal norm, with production in late April/early May reaching the highest level seen in the last three years. Favourable weather conditions have significantly contributed to this, and look set to continue.

Milk volumes increases are now at a level where we forecast that milk prices should decrease in the forthcoming months.

ONE TO WATCH! Sugar not so sweet after all?

We've been seeing sugar, jams and confectionery all in low/no inflation for some time now, but this looks likely to change as oil prices have risen since January, leading cane growers to turn towards ethanol production as opposed to refined sugars.

Brazil is the largest producer and exporter of sugar in the world, and sugar mills there are likely to use only 37.1% of its products in sugar production as plants prefer a more profitable outcome for their cane. The movement so far is not that material, but this is definitely one to watch. Personally, I am most anxious about the impact on the cost of a caipirinha!

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