The impact of the Iran war and the recent resurgence of hostilities between the US and Iran continues to be felt across food supply chains, with industry experts warning inflation is showing no sign of letting up.
Elevated fuel and logistics costs due to the ongoing blockade of the Strait of Hormuz were singled out as a key driver in the increase in the headline inflation rate this week, which rose from 2.9% in July to 3.1% in August.
Food price inflation remained flat at 1.3%. However, the IGD warned “food inflation has been delayed, not avoided”, with the charity forecasting it could rise to above 6% by next year.
And with Brent crude oil futures surging past $100 a barrel this month, their highest level since May, supply chain experts are warning of more pain to come for the food sector.
Diesel prices were up by as much as 40% on pre-war levels, translating to about an 8% hike in freight costs, said Jack Baxter, operations director at logistics firm Europa Road.
This compared with an increase of about 5% in March. Baxter said the company had been faced with “no choice but to pass these costs through to our customers, and ultimately consumers through higher prices”.
RAC data shows average UK diesel prices have risen from around 142p per litre before the start of the Iran conflict to more than 190p per litre today, adding roughly 35% to fuel costs.
Baxter’s comments were echoed by National Federation of Fishermen’s Organisations CEO Mike Cohen, who said the fuel price situation remained “extremely challenging” for fishers, with “everybody suffering”.
“Some people have reached the point where they simply can’t take any more and are having to tie the boats up and hunker down and try and survive,” he said.
According to Cohen, elevated red diesel prices had caused fishing trip expenses to soar, with trip costs “now about 40% of the value of the catch”.
“Red diesel prices have been going up for such a long time now that people are telling me they have now, basically, burned through their reserves trying to make up for the costs,” he said. “There just isn’t any slack left for businesses.”
Among the worst affected are scallopers, due to their relatively heavy vessels and the impact of seasonal fishery closures.
“One producer organisation in the south west told me that five out of six scallop vessels have had to stop work, so it’s pretty bad,” Cohen added. “Normally, during the area closures those boars would go further afield and keep working … but fuel prices are so high that it would cost them more to cover the trip.”
Further, he said the situation was starting to have a knock-on effect on processors, who he said were “having to start looking further afield” due to the disruption to the supply chain.
Responding to the crisis, Cohen said the government needed to recognise that the ongoing situation was “really starting to hurt” and pointed to the relative support received by the fishing sector in the EU.
“The EU has a crisis fund for situations like this … various member states have been providing financial support to their fishing fleets,” he said. “It’s really galling for our fishermen to be unable to afford to go to sea and then see European boats fishing where they work.”
Cohen added: “We really need government to step in and provide support like the larger part of our European colleagues and competitors are doing.”
Elsewhere, the Petrol Retailers Association this week warned ongoing global fuel supply pressures – compounded by Yemen-based Houthi rebels affecting Saudi Arabia’s alternative export route via the Red Sea – meant it was becoming “impossible for forecourt operators to absorb these levels of wholesale price increases without putting their businesses at risk”.
“Retailers understand the pressures motorists are facing, but they cannot absorb sustained increases in wholesale fuel costs. With prices continuing to rise, we are urging the Chancellor to abandon the planned fuel duty increase and avoid adding further pressure at the pump.”
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