Price Points

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

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

28 August 2018
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Meet the Expert

Who: David Read

What: Chairman

Where: Prestige Purchasing

 

UP! Baked potatoes will push prices up

At the start of the year in the UK, we had extreme snow. Then we had prolonged rain. More recently, we’ve had drought and extreme heat. Our poor stressed and confused potatoes are perhaps unsurprisingly turning out to be below prior years on yield, size and quality.

This is concerning in itself, but Germany, France, the Netherlands and Belgium all typically produce over 3m tonnes a year, and all of them are experiencing lower yields in 2018. This is putting the whole European market under pressure, and a small increase now is likely to accelerate in the months ahead.

Whilst on the subject of spuds, Defra has issued a letter that was sent to key potato industry stakeholders that says that if there is a no-deal Brexit, seed potato exports to EU countries would stop immediately. It’s as yet unclear what will happen in the opposite direction.

UP! Milk becoming clearer

Last month we reported that the drought and heatwave have been causing acute distress to dairy farmers, with yields falling by about 3 litres per head and the lack of grass causing anxiety. The price of milk and cheese (whilst still down year on year) is now rising, with cream and butter still relatively stable.

After months of holding back price increases, some milk producers have now begun to raise the cost. For example, Arla has announced a 0.88p per litre increase in price for its milk and both Muller and Meadow Foods have also announced a similar change.

In our view, the market will now continue to firm in the months ahead, in spite of the recent break in the weather.

ONE TO WATCH! Coffee may be on the turn

The global price of coffee has been either stable or falling for some considerable time, with coffee futures recently down to a 29-month low. With Brazil’s output rising, one might expect a further price fall, even though demand continues to increase.

There is one risk out there though, and it could (in time) be highly significant. Colombia has for several years been facing an increasingly large infestation from the coffee borer beetle (or coffee berry borer), which is a small beetle traditionally native to Africa. It is among the most harmful of pests to coffee crops across the world.

The problem is now reaching a scale where production is being impacted, and there are fears that the position will worsen significantly before it gets better.

DOWN! Something fishy with fish

With sterling in the doldrums again, it’s not surprising that fish is so much more expensive than it was this time last year. Our national passion for tuna and salmon means that almost 70% of the fish we eat is imported, which in turn has seen the fish category of the CGA Prestige Foodservice Price Index rise to 23.4% higher than in the same month in 2017.

Other impacts have been severe restrictions on tuna fishing for 2018-2020 in the Pacific Ocean aimed at recovering stocks, sea lice issues in Norway resulting in the harvesting of salmon early, and the price of crude oil, which has strengthened the Norwegian krone, putting further pressure on salmon prices.

The good news is that the month-on-month index for fish is now falling, and we expect to see some further easing in the months ahead.

UP! Oils and fats are at it again

I’ve become rather tired and grumpy with the stream of bad news emerging from the world of oils and fats. But as this month comes to an end, the harvest has been winding down, and we now have a clear picture of this year’s average yield. Early reports indicate that oilseed rape is 3-8% down.

In Paris, rapeseed futures continued to rise through the month. Currently, the November 2018 contract is above the rolling average. As a result, it is expected that the selling price will exceed the market average.  Early reports of Germany’s rapeseed production estimated a fall of 16.8% from that of 2017.  

Eventually this market will adjust, but the ‘sooner’ still feels some way off.

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