Market Report November 2013

RPI Summary

Annual RPI has remained relatively stable throughout the last quarter reflecting a similar pattern to the last 12 months and ended the year to September at 3.2%. As you can see from the graph, this contrasts sharply with the high fluctuations across all the core food commodities tracked.

Food and catering RPI is drifting upwards and was reported at 3.6% for September.


The spike in April/May clearly shows the impact of the horsemeat scandal. Prime cattle slaughterings were 7.1 per cent lower than in August 2012 at 132 thousand head.

According to BOABC (Beijing Orient Agribusiness Consultant Company), domestic beef price will continue keeping high in the second half year of 2013 with cattle supply predicted to be tighter in the second half year of 2013 than in 2012. Processing quantity is predicted to decline about 10%.


Prices will continue to increase through 2013 and into 2014


Month on month decreases in 7 of the last 12 months led to an annual increase of just 3.3% at the end of September. This despite a peak increase back in December of last year of more than 13%.

The Deadweight Average Pig Price (DAPP) reached a new record high of 169.35p per kg in early September with finished pig prices 18p above the same period in 2012.

The predominant factor affecting the price of pork is the plight of British pig farmers who are, as a result high feed prices and low returns, are being forced out of the market at an ever rapidly increasing rate.


Little price stability in the coming months but unlikely to see any price decreases.


Cereal RPI has had the smallest range of price increases during the period (2.3% -6%).

Cereal prices fell 8.3% in July although this was still 0.4% higher than the same time the previous year. The fall was driven by a drop in trade demand on the back of an expected rise in global production of cereals.

HMR&C trade data for the same period showed that the UK imported some 328.5Kt of wheat – this represents the largest monthly wheat import figure since figures were first recorded (1992). Exports were reported at just 31.6Kt.

Defra’s first estimate of UK wheat production was generally lower than expectations at 12.1m tonnes – 9% below 2012. Despite the drop in volume, quality has improved and a HGCA (Home Grown Cereals Authority) report suggests more UK wheat would be used by the milling sector.

Feed wheat started at £200 a tonne in 2012 dropping to £150 a tonne in September 2013 – and this set to rise. The market is vulnerable to increase and with planting down, crop for 2013 will inevitably be lower


Still unstable with little prospect for price reduction in the short to medium term.


A bumpy 12 months for fish prices with no trending pattern ending 3.4% up year on year.

Rises in the price of diesel used to power fishing vessels will have a “significant effect” on the cost of fish over the next 12 to 18 months as trawlermen struggle to break even says The Sea Fish Industry Authority (Seafish). Their research found the increase was likely to be between 7% and 50%, with an average price hike of 23%.

Good news – cod stocks in the North Sea continue to rise for the seventh year in a row!


Coastal catches continue to provide the best scope for better prices


A slight increase in milk production during August has eased the market a little but trade is reported as thin as buyers and sellers alike hold out before committing to price.

Competition for scarce product will keep upward pressure on price – although this will be mitigated slightly by the strength of the pound against the Euro. Price per litre in July was 31.4p per litre with a forecast of 40p per litre by Oct.

Cheddar increased £75 per tonnes this year with short supply and firm demand continuing to keep the cheese markets strong during August and September.

Cream increases £30 per tonne July.


Anticipate upward pressure on milk and dairy prices

Other Markets

Potatoes … Weather in the perishables market is the greatest contributor to fragility in prices – e.g. where potatoes hit a high of £600 per tonne in 2012 their price has dropped progressively from £310/tonne in July falling to £130/tonne this October as the new crop has brought surpluses.

Eggs …How do you like your eggs? Egg prices hardened then softened during the last quarter.

Fuel and Energy … More than 50,000 energy consumers have switched their suppliers and many more are expected to follow as a direct result of the significant price increases levied by the big energy suppliers in recent weeks. This increased cost of production will surely find its way into wholesale prices in due course – more so in the disposables and packaging sectors.

Oil price volatility is on the way and we’ll have to wait to see how long before any increased fuel and thus, transportation costs, are also passed on to the consumer.

Green grocery … Buyers are increasing their number of growers in order to spread their vulnerability to the troughs and spikes of weather, exchange rate and political instability – this would seem to be a good thing.

In Other News …

A study just published (J Med Internet Res 2013;15(6):e125) could be the first study that has used Twitter as it’s underlying data source. Researchers at the University of Arizona, Tucson, reasoned that Twitter was an acceptable method for collecting data and for this study they used the social media’s infrastructure to help collect people’s eating behaviors and reasons for eating. The flexibility and availability of Twitter allowed participants to record their eating behaviors in real time in any location.

This looks like a really interesting development with enormous scope going forward for tracking trends, tastes and dietary related issues.


The steady rate of inflation on food costs at 3.5% per quarter which reflects the consistent inflationary trend over the past 3 years has systematically undermined margins in the hospitality sector. Supplier margins have been pared to the bone, and the pressure to progressively increase tariffs is causing pain to the corporate and consumer pocket.

A forecast of food cost increase of 4.5% next year would be wise, taking into consideration the major levers to food price sensitivity: energy; exchange rates and weather.

Energy: rises in fuel prices coupled with the uncertainty of political stability within the oil producing countries is the predominant factor causing the major upward pressure on food prices. Exchange rate: this has been relatively stable despite considerable turmoil within those weaker European states reliant on Germany to support the Euro. Weather: considerable volatility within the seeding, growing and harvesting cycles (with no two predictable growing seasons) hinders efficient commercial planning and therefore nervousness around pricing. This can often cause sharp spikes and price speculation in the market.

The overarching threat to all food prices was highlighted by ‘horse gate’ – at what point will a 20p burger containing horsemeat be considered good value? Until we have total food traceability throughout the supply chain we will continue to live under a shadow of a potential food safety scare. Understanding the value of where your food has come from, by whom and the methods by which is it being made available has never been more acute. Scrutiny into supply chains to validate the safety of food and its provenance adds a significant layer of costs hitherto suppressed or obscured.

To ensure stable profitable margins within your business, procurement strategies need to be central to operations, sales, marketing and finance. Leaders are expected to match or exceed the social values of their stakeholders – investing in an infrastructure to protect the safety and quality of food is an expectation that falls within this remit.

Raw material procurement is becoming a central strategic function to overcome the concerns driven by security of supply, price volatility, maintaining margin and brand differentiation. PIP continues to keep a close eye on the transparency and traceability of your supply chains, supporting and steering you to better functional choices.