The extremely hot temperature across Europe this year, while welcome to the soft drinks industry, will significantly impact on pricing of apple-based juice products for the next 12 months.
The majority of apple for juicing, be it in concentrated form or single strength, is produced in Germany and Poland. The factors that influence the cost are the size of the fruit and its acidity. The drought conditions have resulted in smaller fruit, a crop in the region of 30% lower than last year, and a sweet fruit that due to lower acidity.
Farmers are forcing up fruit prices, in some instances by over 100%, with the consequence that concentrate prices are set to rise by 35% to 40% in euro terms. When the deterioration of the sterling against the euro over the last 12 months is taken into account a rise in apple juice costs in the region of 50% is being reflected in new season pricing with immediate effect.
Users of subsidised EU butter for manufacturing are set to pay more. The subsidised scheme has proved almost too successful this year with the benefit of subsidies off the normal market price of 1800 per tonne on butter and pro rata on cream.
Brussels has warned subsidy rates will be cut by the end of this week. Some operators believe the only reason for making a change is that the Commission is trying to sell off some year-old intervention stocks for butter at a price which has so far proved unattractive. Pushing up the price of butter for manufacture may help to clear these intervention stocks.