Amid declining consumer confidence, food price inflation is being contained but the price of meat could still see significant increases, new forecasts suggest.
In its latest quarterly retail price report, published this week, agrifood consultancy EFFP stuck to its long-term view that UK food price inflation would "top out" at 6-7% in 2011, as a slump in consumer demand put the brakes on raw material rises being passed on to shoppers.
Earlier this month, The Grocer reported that supermarket shoppers were paying 3% more for their weekly groceries after promotions were included a figure far lower than official figures from the ONS had suggested with a price war resulting in zero inflation at Asda; and just 1% at Tesco [The Grocer, 2 April]. But even before promotions were factored in, there is evidence that price hikes are being held back. This week, the ONS announced a "surprise" drop in headline inflation to 4%; while the BRC said food price inflation had dropped from 4.5% to 4% between February and March.
Siôn Roberts, senior partner at EFFP, said the figures reinforced its price projections, but he warned that with raw material prices remaining high, meat prices were only now starting to rise. "Although we forecast food prices to fall overall, our short-term proviso is that on meat some increases are still to come."
According to EFFP's meat price index, when feed wheat prices rose dramatically in 2007, it took about a year before these increases were fully reflected in beef, pork and poultry prices at retail. This is in contrast to products with a more 'direct' link to wheat, such as bread, which tend to see raw material hikes reflected at retail far more quickly.
Following the wheat rises in 2007, meat retail prices ultimately went up 20%. "We're not saying prices will rise 20%," Roberts said. "But clearly you have a problem here underlying costs for meat producers have gone up, but prices haven't. So far, margins have been squeezed, but that can't go on forever."
In its latest quarterly retail price report, published this week, agrifood consultancy EFFP stuck to its long-term view that UK food price inflation would "top out" at 6-7% in 2011, as a slump in consumer demand put the brakes on raw material rises being passed on to shoppers.
Earlier this month, The Grocer reported that supermarket shoppers were paying 3% more for their weekly groceries after promotions were included a figure far lower than official figures from the ONS had suggested with a price war resulting in zero inflation at Asda; and just 1% at Tesco [The Grocer, 2 April]. But even before promotions were factored in, there is evidence that price hikes are being held back. This week, the ONS announced a "surprise" drop in headline inflation to 4%; while the BRC said food price inflation had dropped from 4.5% to 4% between February and March.
Siôn Roberts, senior partner at EFFP, said the figures reinforced its price projections, but he warned that with raw material prices remaining high, meat prices were only now starting to rise. "Although we forecast food prices to fall overall, our short-term proviso is that on meat some increases are still to come."
According to EFFP's meat price index, when feed wheat prices rose dramatically in 2007, it took about a year before these increases were fully reflected in beef, pork and poultry prices at retail. This is in contrast to products with a more 'direct' link to wheat, such as bread, which tend to see raw material hikes reflected at retail far more quickly.
Following the wheat rises in 2007, meat retail prices ultimately went up 20%. "We're not saying prices will rise 20%," Roberts said. "But clearly you have a problem here underlying costs for meat producers have gone up, but prices haven't. So far, margins have been squeezed, but that can't go on forever."
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