Prices and predictions from allmanhall

A look at 2023’s food inflation, by Mike Meek, procurement and sustainability director at food procurement and supply chain management experts, allmanhall

 

What is the outlook for food supply chains in the short term and why are we still seeing high food prices? Here, the team at allmanhall provide some insight and updates, to help you understand what to expect for the rest of the year.

 

In February 2023, the twelve-month ONS CPI data reported food and non-alcoholic drinks inflation at a very obstinate 18%: much higher than overall general CPI inflation of 10.4%. In January 2023 ONS CPI data cited these as 16.7% and 10.1% respectively. As an independent measurement of food inflation, The Food Foundation’s ‘Basic Basket’ reported that food inflation increased by approximately 17 to 22% March 2022 to February 2023.

 

What are we seeing in different categories?

 

The 12-month rates of inflation for all individual CPI food categories have increased by over 14.9%. The exception is fruit which rose by only (!) 7.7%.

 

In reverse order, the three highest rising categories are: vegetables (including potatoes) +18%; then in second place milk, cheese & eggs +30.8%. Oils & fats are at 32.1%.

 

The ONS highlighted that the “largest upward effect came from vegetables, where prices rose in the month to February by more than a year earlier”.

 

Some soaring products…

 

The average UK farmgate milk price in January 2023 was 49.2p per litre. A year ago, it was 35.46p per litre and two years ago just 30.24p per litre.

 

Looking at beef, the deadweight price for finished steers (R4L grade) is 492p/kg up from 419p/kg a year ago. This is a 17.4% rise. Deadweight UK cattle prices are now quite close to UK R3L lamb prices, which are currently 511p/kg.

 

Similarly, pork prices have risen substantially. UK deadweight pig prices are 211p/kg up from 138p/kg a year ago. Or 52.9%.

 

Canned tomato products and tomato pastes have increased significantly over the last year. Italian chopped tomatoes for instance are over 40% more expensive than this time last year.

 

 

In the short run

 

Food inflation is expected to remain problematic, short term. Despite the ‘rate’ of inflation falling, immediate marketplace inflation is still historically high, which will continue to impact food prices. The rate of inflation is, however, expected to gradually fall over the next twelve months

 

allmanhall’s expectation is that food inflation will initially remain tenaciously high, forecasted to be well above the five-year average. The effects of high energy costs and lower global food costs are cascading through the supply chain, and this will keep those food prices stubbornly high, for the short term.

 

We can all see this, daily, with the high price of food and limited availability of fresh produce continuing to grab headlines. Salads, capsicum peppers and tomatoes have been significantly impacted by poor weather conditions in North Africa and Spain, which has led to empty fresh produce supermarket shelves. High energy prices have also impacted these, although this may shift as we move into summer.

 

Many categories have reached or are close to reaching peak inflation. However, this is not to be confused with cost reductions; really what it means is a slowing of the rate at which prices are increasing.

 

Vegetable oil commodity prices are falling. We would expect to eventually see this flow through to lower product prices for caterers. Spring is a time at which dairy commodity prices begin to soften, so we are keeping an eye out for a drop in the average farmgate milk price. For those that can afford lamb, the price of UK old season lamb is now 10.35% lower than a year ago.

 

Anything else to be aware of?

 

There are concerns that UK farmers are restricting crop plantings upon fears of potential drought or water restrictions following the record low levels of UK rainfall in February. UK potato plantings could be much lower with fears of water shortages owing to the lack of rainfall in February. This will reduce supply, impacting availability. Which is likely to then drive-up potato prices later this year.

 

Right now, what steps can help navigate this?

 

allmanhall have been making recommendations to support foodservice operators to traverse the price rises of late.

 

Value can be found in multiple ways. For example, moving from branded purchases to own label can be highly economical. Particularly if they’re being used in back of house production and where quality standards allow.

 

 

One key means of releasing value is by understanding the relative costs of similar product groups and rebalancing purchases to preference of cheaper alternatives. For example, looking at protein at a commodity level, deadweight lamb is 511p/kg, beef 492p/kg, pork 211p/kg. And non-meat protein alternatives like lentils are just 168p/kg – worth considering when planning menus.

 

Beyond pricing, do make sure you factor in the impacts of cooking on product yield and portion costs for yield loss, shrinkage and consistency.

 

It’s important to take into consideration the likely future market dynamics. Be cautious about trying to secure long term price holds when commodity market prices are high (as they currently are) and when some are likely to fall. Important tip: Longer term price fixes are more effective when commodity prices are low as the risks associated with overpaying are minimised.

 

A food procurement expert like allmanhall fully understands the complexities of food markets and supply. This enables the management of that supply chain and offers foodservice operators proficient negotiation, mitigation of extreme or sudden price rises and insightful advice to help plan and make best use of budget available.

 

The category specialist team of buyers at allmanhall are actively negotiating down proposed price increases. They are keeping clients up to date regarding price increase modifications and alleviations as these are achieved. allmanhall are also providing insight about what to expect, to help food service operators plan menus and budgets. Now more than ever, the support of a food procurement expert provides essential support for food service operations. allmanhall are mitigating risk and price increases in uncertain times.

 

To find out more, please don’t hesitate to visit the allmanhall website or contact the allmanhall team. They are very happy to help and can provide further insight, sustainable value, support and control for your foodservice operation.