Business Issues News

Brexit fears push up food prices further

Oils, fats and fish continue to trade at prices more than two per cent higher than last year, a survey has revealed.

The latest edition of the Foodservice Price Index from CGA and Prestige Purchasing confirms that the possibility of a no-deal Brexit continues to dominate the risk agenda for buyers.

The Edible Oils & Fats index has risen every month since February and is now at unprecedented levels.

Much of the rise has been driven by a huge surge in the price of butter over the past two years, where the upstream wholesale price reached a peak in October 2017 of almost three times the level of the prior year.

Around seven per cent of this price spike came off in the early part of 2018, but weather problems have contributed to a further rise, to a mid-point between the two.

We expect this now to ease as we enter the winter period as the upstream wholesale price reduces.

Recent falls in the hot beverages’ category have meanwhile corrected, while fruit prices continue to reduce from the highs of the summer months, and sugar prices fell a further 5.2 per cent in September, in line with recent trends.

Recent indications from the Prime Minister that the UK’s Brexit withdrawal agreement and declaration of future trading relationships are likely to complete this month have been welcome news.

The Fish category of the Index shows that quota regimes continue to drive cod and haddock prices higher. Salmon pricing extends the recent trend of violent swings, with a near-20 per cent drop in the summer now reversed, and the price creeping slowly down again since.

Fish imports have been affected by recent further declines in the value of the pound, and trade turbulence has been created in world markets by the imposition of a 10 per cent tariff by the US on Chinese fish imports—which in turn is pushing up demand and price in other countries.

It is usual to see the Fish index drift down over the winter months, but a material difference is not expected in the foreseeable future.

Shaun Allen, Chief Executive at Prestige Purchasing, said: “We have seen a much higher level of volatility within some food supply markets this year, which once again is impacting margins for operators, who are already under pressure in this area. “An EU withdrawal agreement that gives more certainty around future trade arrangements will do much to calm markets as we head towards 2019. “In the meantime, it’s essential that operators take a proactive approach to management of future risks of inflation.”

Fiona Speakman, CGA Client Director – Food, said: “Steep inflation in the Oils & Fats and Fish categories in the latest edition of the Foodservice Price Index is another sign of the volatility experienced by the sector ever since the UK’s Referendum on leaving the EU.

“There are many other inflationary pressures beyond Brexit of course, but we see no sign of the turbulence easing as the date for leaving the EU draws nearer, and an anxious few months lie ahead as buyers await clarity on the terms of departure.