Food price inflation will slow to 3% by June next year but volatile price swings are here to stay, predicts a new retail food price forecasting report out today.
Published by English Farming & Food Partnerships and based on a forecasting model developed by Cranfield School of Management, the report says food price inflation, which has been running at 11-12% over the summer, will drop below the rate of general inflation, currently 5.2%, as commodity and oil prices fall away.
However, EFFP dismissed suggestions that the price spikes seen were a blip.
“We think that food price inflation has now peaked and that it will be down below about 3% by next summer,” said EFFP chief executive Siôn Roberts. “But the balance between supply and demand is set to stay tight over the longer term, with many of the fundamentals such as population growth and climate change remaining important long-term trends.”
The model uses four key inflationary drivers – oil and food commodity prices, the CPI and exchange rates – to predict how future food price inflation will move and has been tested over the last six months.
Using the tool, EFFP is also mapping inflation within individual sectors but will not make these figures public until further work has been done to test the accuracy of the modeling further.
According to EFFP, the tool will provide a more reliable means of predicting future volatility in the market than predictions based upon “gut feel and anecdote” made recently by food industry figures, said Roberts.
EFFP hopes the model will encourage retailers, food businesses and farmers to forge stronger relationships. “Food companies should start to look at purchasing as a strategy rather than as a tactic,” said EFFP chairman Steve Ellwood.
EFFP is a not-for-profit agri-food consultancy set up in 2003 to help address the disconnect between food companies and the farming community and to promote the benefits of horizontal and vertical collaboration.