Food costs overview for June

H & C News is pleased to be able to share information on food costs and trends for June – from fruit and vegetables, to meat and fish, to dairy – supplied by Prestige Purchasing.

Overview

Overall CPI for the UK has risen from 2.4% last month to 2.7% this month, which is slightly disappointing. A big driver of this has been the rise in the cost of air transport, 22% since last month.

Food inflation, however, has decreased from 5.0% to 4.4% from April to May and is tracking within the predicted margins expected for 2013 and falling in line with our forecasts from last month. The main drivers behind this are oils & fats, fruit, vegetables and sugars & confectionery, all of which decreased in price this month. That being said, the three categories where price is most inflated from last year are currently fruit (10.9%), vegetables (8.6%), and bread and cereals (4.9%).

This Month’s Highlights

Fresh Produce

The majority of varieties increasing; Braeburn (8.3%), Bramley (18.2%), Granny Smith (4.2%), Pink Lady (5%) and Red Delicious (13.6%) have all gone up in price, whilst Cox’s, Golden Delicious and Royal Gala apples have remained stable.
Banana prices have fallen throughout May following a 16% increase in April, and are back down below the prices of two months ago having decreased by 17% this month. Potential strike action proposed to start mid-to-late June could have significant effects on banana supplies and push these prices back up by the end of the month.
It looks as though June will signify a move to more English grown strawberries, which is made even tastier by the recent fall in price (-52%), and the recent sunshine has resulted in more locally produced strawberries reaching the market. The same cannot be said for raspberries as we wait on them to sweeten up a little more.
Mango, grapefruit and kiwi fruit are all coming into season for the summer and we can see prices starting to climb a little as demand increases. Grapefruit has gone up by 13%, and kiwi by over 6%, whilst the price of the mango has remained stable.
The prices of potatoes continue to remain high. The price of grade 1 potatoes has gone up again this month, and we expect to continue to see high prices throughout this season for these; Maris Piper potatoes jumped up by 7.4%, whilst Estima increased the least by 1.1%. If you are looking for grade 1 potatoes, Desiree are the most cost efficient at the moment. The price of frying potatoes, however, has fallen considerably – between 2.2% (Maris piper) and 11.4% (Agria) – with Markies providing the best value for money. Whilst crop volumes are improving on those seen last year, prices continue to remain high as supplies are still remaining short of demand levels. In addition to this, farmers do not expect many of their crops to be ready until late autumn following on from late plantings as a result of extended wet and cold weather.
The vegetable market has suffered some fluctuations since the start of May, with asparagus and aubergine being affected by 12% price variation, and aubergines by 18%. When comparing the start of the month to the end however, there is little change. We know that as fresh beetroot comes into season, the price tends to go up, and we can see a price increase of 40% over the last month. There has been some stability in the radish market as prices remain stable, whilst we have actually seen a decrease of 25% on the price of cucumbers.

Meat & Poultry

Beef prices have been primarily increasing across May into June, but last week saw these prices start to fall slightly. This is unlikely to impact the overall upward trend, and we can see that month-on-month (m-o-m), the prices of steer (+0.5%) and heifer (+0.8%) are still increasing, whilst bull (grade R3; -0.5%) and cow (all grades; -4%) have been decreasing. Market experts indicate that prime cattle supply has been ahead of demand – so whilst m-o-m prices have largely seen increases, latterly these are looking to ease off, as illustrated by the slackening in price over the last week.
Lamb prices in the UK have gone up this month by over 8%, as have European prices (+4.4%) but UK lamb still remains higher in price than EU comparatives. As of last week, we are seeing the UK prices fall. Prices are being pushed up by a current oversupply of old season lamb (OSL), which is delaying the switchover to new season lamb (NSL), as numbers of OSL are much higher than those experienced last year. Whilst you would expect an oversupply of lamb to bring prices down, they are increasing because of the delayed start to the new season and the reduction in NSL reaching the market compared to last year – this is the more sought after variation of the two at this time of year, and the OSL market should almost be depleted by this time. However, as the volume of NSL reaching the market does increase, we are seeing these prices fall as a result (they are currently down 5.5% on last month).
The price of pork has gone up across the last month, rising by 1.7% on both the UK and EU front (when looking specifically at DAPP – deadweight average pig price), and European prices are still sitting above those of the UK again this month. Pork prices are climbing this month as the British weather finally looks to be picking up and buyers are starting to forward order in preparation for the summer and the expected barbeque demand.
Chicken prices peaked to their highest of 2013 in May, reaching heights of £1.31/kg, but June has seen these prices start to slowly ease again. M-o-m chicken prices (broiler deadweight) have fallen 0.8%. Since the turn of the year however, prices are still up 7.5%. Typically, over the last three years, chicken prices have peaked in May, and remained relatively high for the summer period, and we can use this as a trend indicator of things to come.

Dairy

The price of milk remains unchanged this month, but deliveries of milk were lower in May m-o-m, and farmgate prices are 8% higher year-on-year. The improvements to the weather that we have witnessed in the last month bring news of a hopeful recovery in UK milk supplies and, while developments will not happen overnight, we are hoping they will hit production levels and prices soon. That being said, announcements have been made by several milk processors that as of next month the prices they pay to processors will be going up, which could maintain current high prices.
Butter prices spiked in April, and whilst May saw these prices fall slightly with salted (80% fat) decreasing by 4% and unsalted (82% fat) by 3.9%, these decreases have not reduced prices back to levels that we were seeing at the turn of the year. Prices have gone up over the last six months by 26%, and these recent decreases do not necessarily indicate the start of a downward trend. Butter prices have been highly affected by the reduced supplies of milk reaching the processing industry – which, in turn, is maintaining lower dairy stocks on the whole, including butter.

It is thought that butter prices will remain higher for the next few months as suppliers seek to fix new pricing standards in a bid to accommodate these changes, and also because more milk is being driven into the milk powder market to meet the increase in demand here.

Cheese is another market which has been greatly affected by milk supply issues, and increases are being seen across the board. Cheddar cheeses have increased m-o-m, on average by 6%, ending the price stability we have been used to since January.
Egg prices have fluctuated this month, with the only notable decreases being for extra-large eggs (-3.6%). The price of large (+0.8%), medium (+4.6%) and small (+10.5%) have all seen an increase m-o-m, and the rise in medium eggs bring their cost above that of large eggs. Small eggs are only marginally cheaper than large eggs too; therefore it is worthwhile considering looking at purchasing large eggs in favour of the smaller sizes for increased cost efficiency.

Prices may still be fluctuating, but they are showing signs of stabilising. Free range eggs are currently in a surplus situation and this is causing some pressure on the free range market. If this continues, it could push prices lower in weeks to come. As summer commences, we also see more processors with high stock levels meaning it is likely that most of these processors will start the autumn season utilising chilled store stocks which will restrict the potential price increases at that time.

Fish and Seafood

Cod prices, on average, have increased this month by over 30%. Cod prices will always be subject to fluctuations due to their substitutability; when the price is high, consumers will substitute it for a cheaper alternative, and when the price falls they will return to using it. This substitution can account for some of the variations we also see in other groundfish such as haddock (+26.1% on average) and pollock (+0.37% on average). Cod is currently the most expensive of the three fish, and as a result it is worth considering using haddock or pollock. The fall in haddock prices may be partly attributable to the news that stock numbers in the Barents Sea are in better shape than was thought at the start of the year. However, it looks as though 2014 could bring yet more cuts to the haddock quota, which will create a higher baseline price.
When it comes to the oily fish category, both mackerel and sardines (Spanish) have increased considerably this month. Mackerel prices have gone up by over 25%, and sardines by over 35%. The MSC (Marine Conservation Society) has updated and developed its ratings for mackerel, putting the fish back on the menu. This has resulted in a slight increase in popularity with consumers, increasing the demand and pushing up prices.
Norwegian caught salmon prices have increased, on average, from £3/kg to £4.50/kg between May and June. Prices year-on-year (y-o-y) have increased by almost 60% since June 2012. Looking at farmed Norwegian salmon, the same increasing trend is also visible, moving from £4/kg to just over £6/kg on average since January of this year.

Scottish farmed salmon experienced a steep price hike (in most cases) around the beginning of March which brought prices more in line with Norwegian caught salmon. However, these prices currently sit marginally lower than those of Norway – just under £6/kg.

There are a few factors that have contributed to the new higher prices we are seeing on the market for salmon; a major factor being the weather. Bad, colder weather in Norway has resulted in slower growth rates of farmed salmon. As a result of this, the catch volumes and production levels have fallen which has, in turn, pushed prices up. Additionally, the rising cost of fishmeal has resulted in an increase in the costs involved in farmed salmon, thus pushing prices up in this department also.

Prawn prices have also seen an increase this month, with coldwater Norwegian prawns going up by over 25%, whilst black tiger South Asian prawns have increased by a more palatable 4.5%. Global supply of coldwater prawns has diminished somewhat compared to demand levels and this is primarily due to quota cuts reducing catch limits by 90,000 tonnes compared to 2012. It looks as though supply levels are starting to improve, however, and it is thought that the high market prices will curtail demand and we should start to see these prices fall in coming weeks.

About Prestige Purchasing: independent, reliable and verified insight

Prestige Purchasing is a specialist consultancy practice helping Foodservice and Hospitality businesses develop excellent supply chains. This is undertaken for every type and size of organisation by applying the very best professional techniques with clients. Prestige is different because money is earned only from clients and Prestige is therefore truly independent. There is no hidden agenda; Prestige works only for you, 100% of the time. And recognises that the way in which your supply chain delivers Quality, Availability and Innovation is every bit as critical as the management of Cost. Prestige does all the leg work, employing a research team that uses over 400 sources of data and information every month to produce unbiased, independent reports.

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