Christopher Clare, Prestige Purchasing’s head of insight gives Footprint the first in a series of quick walkthrough guides in the world of food and drink supply markets.
Overview
CPI (Consumer Price Index) is up 0.2% compared to last month (2.7% to 2.9%), whilst food inflation is down by 0.5 percentage points (4.4% to 3.9%). In line with this, we can also see that food prices are down 0.55% since last month.
The key drivers behind the fall in food prices were fruit and vegetables both of which fell in price by circa 2% from May to June.
At the end of 2012 / start of 2013, the prices of most fruit and vegetables sky-rocketed due to the poor growing conditions weather-wise. The prices of fruit and vegetables have, in general, fallen this month as delayed harvests pick up, and stocks return to more normal levels following on from the start of the year.
This Month’s Highlights
Fresh Produce
Orange prices have gone up this month (+20%). The production costs of growing oranges in primary growing regions have increased and this has meant that the recent large harvest volumes have not resulted in the lower prices that would be expected. In addition to this, prices have been pushed up by the orange harvests in Spain coming to a close.
The price of the cherry has decreased in June (-30%). Cherry harvests in areas like Spain started almost a month late this year after experiencing a colder than average spring. The recent extreme temperatures over in the States also reduced production levels significantly earlier this year, but they are now reaching normal levels, easing prices.
Grape prices have fallen throughout June by almost 40% for both the red and white varieties, and grape prices in Australia are at their best for the last four years. This is the result of a rebound in production following the reduced production levels we saw at the end of 2012 which, combined with high levels of demand, saw prices rocket. The recent drop in grape prices has been bolstered by the start of the harvests in Italy and Spain which are upping market volumes and are producing high-quality fruits, and the exports from Chile have increased over 300% to Europe year-on-year, which is helping to push prices down.
Since the start of May, strawberry prices have fallen by 55%. Despite a delay to the season growers are seeing larger fruit with higher sugar levels, accounting for that deliciously sweet taste – as a result of the extended ripening period. Whilst demand levels are up this year – brought on by the recent sunshine, Wimbledon, and the fruit reaching the market having that sweeter taste – the high volume of strawberries, and abundant level of sales offers are keeping prices down.
Banana prices have fallen to their lowest in over a year as the threat of strikes in Columbia has been averted; and production in other key growing countries returns to normal.
The start of July brings talks of high potato prices back into the spotlight, and as prices across June have risen (+2.75%) this cannot be disputed. 2013 stocks are not yet ready for harvesting, and as 2012 stocks are diminished, either through current demand, contracts or prebought accounts, demand still remains steady and is keeping those prices high – which has been predicted to last until the Autumn. The high prices we are seeing, however, are not restricted to the UK and supply and demand levels in countries such as Spain and Italy are pushing prices higher there too. Desiree potatoes are still your most cost-effective potato, and unlike the other varieties, it has seen a small decrease in price this month (-2.6%) making it even better value for money. If you are looking for a frying potato, it would seem that you are best with the Markies variety for value for money.
Lettuce prices have fallen in the past month (over -20% average) after recovering from supply shortages earlier in the year. Up until May, we were seeing low levels of lettuce, particularly Iceberg lettuce, reaching the market as cold weather caused delays to the harvest. In May, suppliers estimated a three-week lag in supplies returning to normal levels; it looks as though they were more or less spot on with this. The weather earlier in the year has created volatile pricing conditions, but if the weather continues, we could be looking towards a little more stability with plenty of sunshine to boost crop growth.
In other vegetable news, we have also seen decreases in the prices of cucumbers (-25%) and tomatoes (-14% average) as the weather improves, whilst the prices of peppers (+11% average) and carrots have all increased throughout June. These increases are typical for this time of year, but we are experiencing higher than normal prices after the devastation caused by the weather at the turn of the year.
Meat & Poultry
“The price of beef has gone up again this month (+2.4% average), with cow prices increasing the most (+6.5%). The price of beef in the UK is continuing to climb as supplies remain lower than the demand, which has carried on from the horsegate scandal, and does not show signs of easing. That being said, however, it would appear that the price spikes we saw back in February will level off throughout the summer, but prices are expected to remain high at least for the next few months.
Beef cut prices have seen a variation this month, with a mix of those increasing and those decreasing; your top three for value this month are the forequarter (-8%), the shin (-5%) and the side (+1%) as these three cuts currently offer the best value for money. Your more expensive cuts, such as the ribeye and loin are still on the increase and you are best to seek out alternative cuts where cost effectiveness is of the utmost importance.
The price of lamb has, as expected, fallen this month as we switch over to New Season Lamb (NSL) completely (-7.5%). UK prices are still higher than those of the EU, but prices here have fallen 3% more than those of the EU, reducing the gap in pricing. Prices have fallen as a result of a greater supply of new season lamb reaching the market, and this has resulted in an upsurge in demand recently, indicating lower prices may not stay low for long, but a significant increase in price is not expected until the season starts to come to a close.
Lamb cuts have also seen a mixed month, but if you want good value for money, opt for chine ends (-3%) and leg of lamb (-6%).
Pig prices have increased this month (+2.3%) but still remain lower than those of the EU. There are a few accountable factors for this drop in price; the first is the lower production costs that we have seen in June (which are 5% lower than those in January of this year). The second is associated with the influential markets of other countries, such as Germany where imports of this pork are undercutting the prices of domestic pork and forcing prices lower in a bid to compete. It is not thought that prices will continue to drop as weaner prices are slowly on the increase this year
The price of pork cuts has remained relatively stable this month, but opting for the cross cuts, forequarter and belly long are all good, economical options this month.
Chicken broiler prices have experienced a slight increase in price throughout June (+1.5%) and it is thought that this is normal price fluctuations, as we see the seasonal trend of chicken prices increasing for the summer.
Dairy
Milk prices this month have remained stable due to more “normal” weather as of late. Milk production in May was down year on year (yoy) (-1.1%) which provides support to the notion that the demand for milk is currently higher than supply, on a raw and processing level. This is keeping milk prices high, and with new talks between farmers and dairy processing giants like Arla recently, a new milk price increase is due at the start of August. This implies prices will remain higher for the foreseeable future; to give you a little better insight – farmgate prices are up a massive 10.7% yoy.
Butter prices have seen a slight increase over June (+1.4%) and this has been primarily caused, again, by milk supplies. Prices are not expected to shoot up in cost however, as those buying butter are doing so for the short term, not wanting to commit to long term contracts.
The prices of cheddar cheeses have done one of two things this month; either remained stable or increased (+2% average) whereas the price of gorgonzola (-1.3%) and parmesan (-1.7%) have gone down this month. The volume of milk going into the cheese processing market is still low, and this is causing prices to be pushed upwards again this month.
The price of eggs this month has fallen, (-9.4% average) pushing large egg prices lower than medium and small eggs, which are currently the same price as extra large eggs. The egg market is a volatile market and extremely difficult to predict, but now is a good time, based on the last few months to buy large free range eggs. News from processors has highlighted that come the end of July we should expect to see some increases in the price of eggs with pressure being applied in a bid to secure egg supplies.
Fish and Seafood
In the cod and haddock market this month, we are seeing a variation again; cod prices (49-63cm) have gone up (2.3%), whilst haddock (33.5-41.5cm) has fallen significantly (-27.3%). Increases to cod prices are normal for this time of year, and should fluctuate around current levels for the summer months, whilst haddock catch levels are up, which is allowing prices to fall. We should expect haddock prices to stabilize slightly around the price we have seen recently, and no significant increases are predicted in the near future.
Lemon sole (-16.7%), coley (-32.5%), plaice (-37.7%), hake (-42.9%) and ling (-38%) have also fallen significantly this month. This is primarily due to the good weather conditions we are seeing, allowing better catch volumes, and better fish growth at sea. At the moment, the majority of these are better priced than cod, and if you are looking for a great alternative why not try coley or plaice.
Salmon has primarily experienced an increase this month, with Norwegian fresh caught salmon (+0.8%) and smoked salmon (+0.2%) seeing a slight increase, whilst farmed salmon has actually fallen in price (-9.27%). Scottish farmed salmon, however, has gone up this month (+9.4%) and is the highest it has been in over five years. Norwegian salmon remain expensive as reports come in that stocks are down almost 60% in some places yoy. Similarly Scottish salmon volumes are also suffering following on from a colder than average winter at sea which has impacted on growth. If you are looking to buy salmon, Norwegian salmon is the most cost-effective at the moment.
“The price of coldwater prawns (Norwegian origin) has decreased this month, as demand levels begin to fall slightly (-4.6% for fresh 241-320 prawns and -5.1% for frozen 91-120 prawns) slowly becoming more in line with the supply volumes available following quota cuts at the start of the year. Black tiger prawns (21-30, origin Bangaladesh) have also started to reduce in price (-1.8%) as expected after it was predicted that the previous high prices were unsustainable.
