As grains and soybean prices reach historic highs on the global commodity markets, food price inflation will be firmly back on the agenda in the UK in 2013, a new report has warned.
Although the UK’s general rate of inflation is expected to drop to about 2% by the end of next year, food price inflation will buck the trend, agrifood consultancy EFFP is predicting in its food inflation outlook, ahead of its 13 November conference.
At present, food price inflation - as measured by the Consumer Prices Index - stands at about 2% and has been on a downward trajectory since September last year. But soaring grain and soybean commodity prices following the drought in the US and weather problems in other key growing areas mean food price inflation will rise again and hit 4% by the end of 2013, EFFP says.
Palm and palm kernel oil hit the headlines this week as the UK government published its commitment to moving towards 100% sustainable palm oil by 2015. On the global commodity markets, however, the picture is more muted.
The price of palm kernel oil is currently down 21.4% year-on-year, having fallen a further 12.2% in the past month, while palm oil is down 13% year-on-year and 10% month-on-month, as low global demand and good supply from South East Asia puts pressure on prices.
Electricity and gas continue to lead the key risers - they rose 13.1% and 8% respectively over the past month - while LDPE prices are up nearly 20% year-on-year due to recent crude oil price increases.
The price of soybeans is now 27% higher than last year, while wheat is up 36.4% and maize up 14.6% [HGCA, Chicago prices].
“The prices of these commodities are currently at historically high levels as a result of poor harvests and falling stock levels,” says EFFP senior partner Sion Roberts. “Over the coming months, these high prices will be reflected first in the prices of grain-based food products and in the following months in the prices of meat and dairy products.”
However, although food price inflation is set to pick up again in 2013, it will remain below the levels seen in 2011, according to Roberts. This is largely because the general rate of inflation will be lower than in 2011, keeping a check on manufacturing, distribution and retail costs, and because sterling has recently strengthened, thereby keeping import prices in check.
“Providing the world sees a return to more normal harvests next year, the EFFP forecast expects food inflation to decline in 2014,” Roberts adds.
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