Price Points

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

David Read, Prestige Purchasing’s chairman, takes us through the main moves in food prices this month.

10 October 2019
Brexitmeatpoultrypricingseafoodsugar

Meet the Expert

Who: David Read

What: Chairman

Where: Prestige Purchasing

 

From a food pricing perspective, all eyes this October are now on what emerges from No. 10 in the weeks ahead, as the prospect of a no-deal Brexit – or an election followed by no deal – becomes more real. 

UP! Fish on the bounce

As predicted last month, we had a few weeks when prices eased, but new Icelandic quotas on cod and haddock have been pushing up prices, with our CGA Prestige Foodservice Price Index (FPI) showing close to a 15% month-on-month climb. Expect salmon pricing to firm in October as the run-in to the festive season commences.

ONE TO WATCH! Sugar as a fuel

Since the advent of biofuel, sugar producers globally have had the option of switching production into ethanol from more traditional processing markets. This has been the trend recently in Brazil where sugar, for some time an oversupplied market, is suddenly becoming scarcer. There’s a delicate balance between the price of oil and the price of processed sugars, which can cause significant market switches. As a result, we suspect that jams and syrups will firm in the year ahead.

DOWN! Meat me at the bottom

With the possible exception of pork, where African Swine Fever issues have inflated price in recent times, we can expect the current benign prices for the main meat and poultry products to maintain or fall. This summer has seen abundant grass and a good build up of winter feed stocks. Earlier this year, the government said it would introduce tariffs on some meat and dairy products shipped into the UK following a no-deal Brexit, but with the exception of lamb these have yet to materialise. In addition, farmers exporting to the EU will face tariffs of up to 43% on many meat products, compared to the current 0%. In the event of no deal, expect meat prices to fall further, at least for a while.

ONE TO WATCH! Turkeys being gobbled up

A number of production issues are combining to put unprecedented pressure on UK turkey producers this year, with many market observers fearing that wholesale prices may rise dramatically. French turkey producers, who supply a large proportion of the hatching eggs used by UK breeders, say high temperatures during this summer have led to eggs being lost at a much higher rate than usual, reducing available supply considerably.

ONE TO WATCH! Go straight to Brexit. Do not pass go

It’s looking increasingly possible that we will face a no-deal Brexit – either on October 31, or after a general election shortly afterwards. It’s going to get rather bumpy for a while. Here are the major influences on the outcomes – pick the bones out of this: 

Currency: Our City advisors suggest a further fall in the value of Sterling of between 10% and 20%. This is likely to recover somewhat as any positive consequences of Brexit become clear. Imported product will rise over a 9- to 12-month period in line with the exchange rate impact.

Import tariffs: The tariff schedules published by the government in March set import tariffs for food and drink (in the event of no deal) at an average of 4-5%. These will be imposed day one of no deal. This will obviously raise EU imported product prices, but some imported product will experience dramatic falls in price as EU import tariffs (which we use right now) fall away.

Export tariffs: UK food exports to the EU will face an immediate hike in tariffs, from the current zero to some as high as 43%. This will have an immediate and dramatic positive effect upon UK supply, depending upon any government intervention. There may well be a glut of some products as widely spread as lamb/beef, seafood and cereals.

Product availability: The challenges on short shelf life product like fruit, vegetables and chilled product caused by the well-documented freight challenges will likely drive prices upwards, partly through the additional costs involved for hauliers and partly because of short supply.

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