CHRISTOPHER CLARE, Prestige Purchasing’s head of insight gives Footprint an update of market analysis for September.
Overview
The Consumer Price Index (CPI) is indicating that the rate of annual inflation has dropped slightly when compared to last month (from 2.8% to 2.7%).
The rate of food inflation has increased however from 4.4% to 4.7% and is now slightly above that which we have predicted for this year as a whole.
The only food categories where prices fell (on average) between July and August were fruit (still 8.5% higher than this time last year) and sugar, jam, syrups, chocolate and confectionary (3.5% higher than this time last year).
Although the rate of fruit inflation has fallen in the last month as the market improves, it is still much higher than it was last year. This indicates the fruit market has far from recovered from the devastating winter weather last year.
The oils and fats market is up between July and August (from 2.5% to 6%), fish has also increased this month (from 3.4% to 4.3%), and milk, cheese and eggs have also risen (from 0.5% to 1.8%). All three are also higher year-on-year and we know there is an on-going pressure in the dairy market however, and we are not expecting to see these numbers ease over the coming weeks.
Fresh Produce
• The majority of apple prices have remained the same for August, but bramley (-42.9%) and pink lady (-10.7%) have fallen in price.
We predict prices should remain relatively stable over the coming weeks due to the delayed start to the harvest this year, which means this season’s apples are still being harvested, and is running about 4 weeks late; the harvest is usually ending at this time, which pushes prices up for the start of Autumn, but due to the poor weather in the Spring pushing back the start of the season, it is still on going. Also, a more “normal” stock level is being seen across Europe which has created a greater price stabilisation now, and we expect this to continue.
However, as the French harvest for royal gala starts, reports have come in that we should expect smaller fruits reaching the market, but quality is still good.
For value for money, Golden Delicious and Royal Gala are the best. Braeburn apples are still the most expensive.
• Conference pears have decreased in price in August by almost 50%, whereas Packhams and Williams varieties have remained stable for the month. The outlook for pears does look a little better this year, with production forecast levels for 2013 significantly higher than those for 2012 (+7%), we can expect better supplies, and hopefully lower costs.
William pears continue to provide the best value for money.
• The majority of stone fruits – apricots, nectarines, peaches and plums – have remained unchanged for the month of August, but cherries have increased significantly (+71.4%) this month. Cherry prices have risen this month as the Spanish and Turkish growing seasons come to an end, and the UK harvest supply is starting to dwindle too. Now we will move more to US and Canadian imports, which will have air freight costs, pushing prices up.
• After falling in price in July, the prices of blueberries, raspberries, redcurrants and grapes have remained stable throughout August. Blackberries continued to fall in price (-23.1%), but Strawberries (+12.2%) have increased this month after a good run over the summer.
• The bulk of salad produce has not changed in price over August, but celery has fallen in price (-16.7%), as have orange peppers (-7.1%). All other pepper varieties have increased in price this month; green (+4.7%), red (+18.1%) and yellow (+5.9%). Pepper prices are rising slightly this month after an increased volume of peppers are reaching the market with sunspot and skin damage which is reducing the volume of grade I peppers available to buy. Whilst these damaged peppers may be reduced in price, that lack of supply of grade I peppers available is increasing prices.
Tomatoes have been relatively volatile this month. We are seeing the Cherry (-9.6%), Plum (-7.7%) and Vine (-7.7%) varieties have fallen in price in August, but Beef (+33.3%), Round (+7.8%) and Salad Tomatoes (+26%) have all increased in price. Tomato price increases have been a result of a lack of real sunshine and heat in crop-producing countries, combined with a late start to the season in the UK.
• If we take a look at the vegetable market, whilst some items have still remained stable – Artichokes, cabbage, garlic, mushroom, shallots, spinach, and horseradish – there have also been some steep movements in the market. Fresh beetroot has fallen in price this month by almost 15%, as have leeks (-5.4%), onions (-23.4%), parsnips (-20%) and sweetcorn (-51.1%). Sweetcorn has fallen significantly due to the delay to the harvest – whilst sweetcorn is highly associated with summer, supplies are at their peak now, and demand is slightly lower, which is bringing prices down. Along with this, broccoli (-18%), brussels sprouts (-33.5%) and carrots (-16%) have also seen a decrease in price.
• Potato prices are finally experiencing some improvements in the market this month. New potatoes have increased this month by just over 4% but the red (-30%) and white (-33.3%) varieties have fallen more significantly. This is a result of new crops reaching the market, and supplier reports indicate an improvement in volume and quality, combined with a reduction in price. Some marketplaces will maintain higher prices due to the uncertainty of the market for the time being, but should follow suit soon as confidence in the new harvest grows. However, the fallout of last year’s harvest on some growers could hit the market in the medium-term, as some growers have looked to switch the crops they are growing from potatoes which could maintain slightly higher prices as supply is reduced.
Meat & Poultry
• For the second month running, beef prices are falling. If we look at all grades of beef, we can see an average price drop of 3.25%, with cow being the main driver (-4.8%), followed by steer (-2.8%).
Whilst beef prices are falling, we do not expect prices to continue with this trend as word spreads that processors are being squeezed by tight margins. This has been exacerbated but static retail prices, but looks set to affect the whole market as processors will be pressurised into pushing their prices up in a bid to survive. There is a lot of competition out there though, and it may be the case that those processors struggling the most face the risk of being pushed out of the market. It is difficult to forecast, at this time, if these changes will create a significant increase in pricing, but the price decreases do not look set to continue.
• New Season Lamb (NSL) has increased in price again this month (+2.3%), with overall UK lamb prices also seeing increases (+1.9%). France, too, have experienced some prices increases (+0.2%), whilst top European countries (EU-25) have seen some prices decreases (-1.6%) after they rose in July. That being said, the price of UK lamb is still better value for money than that of the EU.
We expect that the volume of lambs reaching the market over coming weeks to start to stabilise around the current levels, and experts think that the quality of meat will be better than last year. Whilst expected supply levels will exceed those of last year, they will still not quite be on par with those seen two years ago, but improvements are being seen in the market which is good news. With this, we predict more price stabilisation over the next few months – providing lambs come forward finished and in specification.
If we compare our market in the UK, we can see we are faring better than our counterparts in countries like France, who are still struggling, and lower ewe numbers in these countries suggests this situation is not likely to change significantly in the short term.
• Pork prices have fallen for the second month running, with UK prices seeing a slight fall of 0.24% across August. European prices also fell by 0.23%, but UK pork is still more economical and a better buy.
This minimal decrease in price indicates, further to last month’s report, the stabilisation of the pork market. Bear in mind, however, that these prices are still higher year on year and it is not thought this will ease much in the run up to winter.
• After a few months of stability, chicken prices have fallen throughout August. UK prices have decreased by 0.7%, whilst Brazilian chicken has fallen by 6.7% (and Polish by 1.6%). Whilst the UK price is slightly more expensive than Brazilian chicken, you need to take into account the added costs of transportation and freight, which will push these prices up. Average European prices, however, are almost 30% more expensive than home-reared chickens.
These price drops are primarily being driven by lowering grain and feed costs.
Dairy
• The dairy market has not eased at all this month, with prices either remaining stable or increasing over the last month. Milk prices have remained stable in August, with unseasonal increases being seen in deliveries as milk production levels improve following on from better grazing conditions, and slightly cooler weather in the past few weeks. There is, however, some upward pressure being applied on prices from two directions; the first is the increase in demand which has resulted in manufacturers competing over lower supply levels, which will increase wholesale prices; and the second being the pressure from farmers, which is aimed at supermarkets and will increase supermarket prices. Yet again, protests are planned in a bid to increase farmgate prices after a price freeze was experienced. Many farmers are reporting an average of 31 pence per litre (ppl), when it costs between 33 and 35 ppl to produce. Although we do not predict any significant price increases over the next few weeks due to increased production levels, we do think that these actions will push prices up as winter approaches.
• All egg prices except small eggs, increased in price over August. Medium eggs are the most expensive, and have risen in price by 14.3%, whilst extra large (+7.7%) and large (+7.7%) are now on par with the price of small eggs. For improved value, you should consider buying extra large eggs, as these are currently just as economically priced as large and small.
Reports from producers suggest the increases we have seen in the price of eggs are due to increased input costs, and prices are up year-on-year by over 30%, particularly in the retail sector. We do not predict egg prices will drop significantly, but will still be subject to the same highly volatile price fluctuations we are used to seeing.
• Medium (on average +2.75%) and mild (on average +1.55%) Cheddars have both risen in price across August, for the second month running. Whilst other key cheeses (Cheddar, Red Leicester and Double Gloucester) have remained stable, after increases were seen in July.
As predicted in last month’s report, based on the MCVE (Milk for Cheese Equivalent) market indicator, cheese prices are still on the rise. Supply levels are still not high enough to support the strong demand levels being seen in the market. Again, we believe this is going to lead to slightly higher prices, and experts agree as they see the struggle producers are having over supplies
• Butter prices have continued to increase for the second consecutive month. Both salted and unsalted butters have gone up by 1.4% this month.
Much the same with cheese, raw milk is still not being sufficiently driven into the butter market either, which is continuing that upward pressure on prices. Alongside this, demand levels are still high in comparison to supply, and this is keeping prices high too. Data indicates that milk production is on the increase, but we cannot speculate as to when this may have any impact on the price of butter at the moment, so expect higher pricing to be maintained over the coming weeks.
Fish and Seafood
• White fish has some variation in the market again this month; cod prices have gone up on average by 19% whilst haddock prices have fallen on average by 29%. At the moment, haddock is significantly cheaper than cod (on average, haddock is over 40% cheaper).
Cod prices are on the increase at the moment following on from much higher catch levels that we experienced earlier in the year – this pushed the prices down – and we are seeing somewhat of a lull in catch volumes in comparison now, which is created an upward pressure on current prices.
Where haddock is concerned, this price drop has been as a result of good catch volumes and good quality fish reaching the market. Do not expect these prices to be long-lived however, as “panic buying” reaches the media. It has been reported that people are hearing about probable reductions in catch quotas in the Barents Sea next year, and in anticipation of this, there is talk of higher levels of demand in coming weeks which could push prices up.
Plaice (-11%) and ling (-19%) make good substitutes for both fish varieties and are currently great value for money having decreased in price this month.
• Norwegian wild salmon prices have varied this month, with the smaller and larger sizes increasing (2.5% on average) whilst medium sized fish have dropped in price (1.5% on average). These prices, at the moment, are highly dependent on catch volumes. Catch volumes from Norway have been good this month, but a lot more medium sized fish are reaching the market which has pushed these prices down. Demand for salmon is high though, which are keeping the other prices relatively high, and this is why we are seeing some increases.
Both Norwegian and Scottish farmed salmon have fallen in price in August. Norwegian farmed salmon has dropped by 3.4% on average, while Scottish salmon has fallen by 9.7% (based on 2-3kg fish). This has primarily been driven by a drop in sales recently for farmed salmon.
• Prawn prices have eased this month, which comes as a surprise in the warm water prawn market due to predicted exports from Thailand to fall by around 50% this year, however price hikes are expecting to hit the wholesale and retail market in the coming months. Early Mortality Syndrome (EMS) has hit warm water prawn regions, and is greatly affecting Thai supplies – the primary exporter to the UK – with mortality rates significantly reducing numbers. This is causing experts to predict vast price increases in coming months, and they expect shortages in the market to last for several years. Now would probably be a good time to make use of the slight dip in Black Tiger prawn prices (-0.5%) before the real damage hits market prices.
Cold water Norwegian prawns have also had a dip in price this month (-2.2%). These prices are easing off slightly after Norway experienced months’ worth of poor landing volumes, which has seen some improvement in recent weeks. We do not predict that these prices will remain low however, as catch volumes are still significantly lower year-on-year, and demand for coldwater prawns could increase if warm water prawn supplies suffer and prices rocket.
