Meet the Expert
Who: David Read
Where: Prestige Purchasing
For the moment at least, food inflation for the restaurant and hospitality sector seems to have stabilised at around 3%, which when compared to the same month last year at nearly 10% is a welcome improvement.
As mentioned last month, operators have a relatively short window to lock in costs savings with suppliers in this relatively benign market. Coronavirus is now a factor that will cause new levels of unpredictability, though the risk of more severity lies in wait during April and May rather than March.
The impact of February’s winter storms on vegetable pricing has yet to become clear.
DOWN! Oils & fats on the slippery slope
As predicted in last month’s update, the price of Brent Crude Oil has been falling, which has led to Rapeseed and other major vegetable oil markets falling too. Coronavirus has caused concern and uncertainty around global demand and trade flow for vegetable oils and oilseeds. Reduced demand from China as a result of the coronavirus, as well as the faltering US-China trade agreement, has led to the price of vegetable oils falling. Expect this to continue for a while yet.
UP! Fish still running away with it
Last month I marked fish as a “one to watch” as the first quarter of the year is when we expect to see month-on-month falls after the seasonal Christmas demand. And as expected fish prices have fallen, though not as fast as they did last year, resulting in higher inflation numbers which are now over 20% on the full basket. The procession of storms we have seen in February have plagued the North Sea and beyond. The other “one to watch” factor was salmon where we have not seen a hoped-for fall in price, mostly due to the knock-on effect of the poor whitefish landings caused by the bad weather. So, it is definitely best to assume that prices won’t be falling any time soon.
ONE TO WATCH! Coronavirus gaining speed
In the past four weeks the COVID-19 outbreak has spread to multiple countries, and though (at the time of writing) the WHO has not declared a pandemic, there are many health professionals now saying that this outbreak is one in all but name. At this stage it’s difficult to get a clear fix on the impact on cost and availability of food, though it seems likely that food commodity markets will fall. Fresh product may be a bigger challenge though if the disease badly affects specific areas of production, or the channel ports. There is also some evidence of consumers laying in stocks at home, which is driving up demand of longer shelf-life products, which could lead to some shortages. We will be monitoring the situation closely and expect to have a much clearer picture by next month’s update.
UP! Eggs frothing up
Egg prices are on the rise as a fall in egg production in the UK has caused a dent in supply. In Q4 2019 just 7.8 million eggs were packed in the UK - a decrease both Q-on-Q and Y-on-Y. Remedying this will take a while to fix, so expect prices to stay at this level for a few months yet.
UP! Fruit bouncing back
More unwelcome news in this problematic category. What is the world’s largest pineapple producing country? Yes, it’s Costa Rica, which has been experiencing particularly poor weather and has caused a shortage of pineapples within the market. Wetter weather in Spain has seriously damaged plum and cherry tomato crops. And clementine and mandarin yields in Morocco have more than halved since this point last year, ironically due to a lack of water. This reduction in supply has caused a strain on the citrus market for easy peelers, as demand for the product remains very high and the lack in supply is expected to continue for the foreseeable future.
ONE TO WATCH! Vegetables about to make a move?
The February storms and associated flooding are playing havoc in some areas with winter vegetable crops and early spring planting. Pricing has been relatively benign for quite a while now, but market-watchers are bracing themselves for this to change, as the real impact of the weather becomes better understood.