Market Report November 2012

RPI Summary

The grain and cereals markets have experienced a  rise in price since their low of 1.5% in July, however, these figures are yet to account for droughts across the US Corn Belt that have downgraded maize forecasts meaning that a much greater increase in prices is expected. Elsewhere, EU milk production has continued to fall seasonally, leading to a rise in dairy product prices.

Despite these increases in key sectors, it is important to recognise that these apparently negative short term fluctuations have not had a large impact on the overall RPI figures. In actuality, the long term trend has continued to demonstrate a promising decline. This can be clearly seen above and there is even a period of greater decline after a relatively stable period between January and May hence the figures for June lying at 2.8%.


Beef herds have so far seen a general decline of 2.2% in 2012. This may provide some explanation for the overall increase in RPI to 12.5% from November and December 2011 figures of 8.5% and 10.6% respectively. However, despite these declines, the total number of beef calves aged less than one year has risen, therefore suggesting that future herd numbers are likely to rise with it.

Furthermore, at EBLEX’s inaugural Processor Conference delegates were informed of various techniques which were said to be scientifically proven to improve the overall quality of the taste of meat.  In particular, post-slaughter techniques, such as hip suspension and electrical stimulation to improve meat tenderness, were heavily stressed as having a hugely positive impact on meat eating quality when done correctly.



The global dairy market is heading for a period of renewed supply scarcity in the coming 12 months, according to Rabobank’s senior dairy analyst Hayley Moynihan. She has attributed this to low milk prices, extreme feed costs and pockets of unfavourable weather hindering growth in milk production. Similarly, there are fears that the market has been lulled into a false sense of security by the phenomenal growth seasons we saw late in 2011 and early 2012 and to replicate last year’s production levels will be increasingly difficult as the year progresses.



EU deadweight pork prices increased on average, mainly due to large gains seen in Germany as high demand is being met with low supply. EU piglet prices remained steady on average during August with falls seen in France and Spain(-12%), while prices in the Netherlands(+13%) and Germany(+12%) continued to rise.

However, chefs and restaurateurs across the country are being forced to reconsider the meat options on their menus after a global shortage of pork and bacon has been deemed ‘unavoidable’ next year by Britain’s National Pig Association. The shortage has come about largely through the poor yields experienced by the US and whilst pig prices are slowly rising, there is still a long way to go to cover the ever-increasing cost of feed.


The world’s largest producer of maize, the US, had been predicted to reach a record 345 million tons in 2012; however, drought in the Great Plains has drastically altered this estimate. Instead, maize yields for the coming 2012–13 growing season are expected to fall by 13% from 2011 production, for a total production of 274.3 million tons.

Despite this news, the total area of UK crops increased by 1.9% in 2012 to just over 4 million hectares, according to the latest National Statistics produced by Defra from their June Survey of Agriculture and Horticulture. This is largely as a result of the high prices for cereals and oilseed rape, which led to increases in these crop areas at the expense of less profitable crops such as field beans and linseed.



The Marine Management Organisation (MMO) has recently published its annual UK Sea Fisheries Statistics for 2011. The report depicts a decline in overall quantity but an increase in value of fish landed by the UK fleet. In addition, the report shows that during 2011 UK vessels landed 600,000 tonnes of sea fish (including shellfish) into both the UK and abroad with a total value of £828 million. This represents a one per cent fall in quantity but a 15% increase in value compared with 2010. However, the rise in value can be primarily attributed to a large increase in the average price of fish obtained in the open seas.

Other statistics show that, in terms of vessel numbers, the UK fishing fleet has retained its position as the sixth largest in the EU, whilst simultaneously holding positions as the second largest capacity and fourth largest power.



Eating Out Trends

Quality food-on-the-go has become the key growth area in the UK’s eating out market. The focus of these latest concepts is providing a gourmet twist on classic fast food favourites, such as burgers and hot dogs as well as upmarket coffee shops. These new chains, such as Gourmet Burger Kitchen, have targeted transport hubs and shopping centres as well as high streets locations as they have identified that consumer habits are increasingly centred on flexible eating times as well as continued growth in healthier food alternatives.

With regard to individual trends it seems that the growing trend of eating out with the family is set to only get bigger in the future.  A recent survey by Peach Report’s of 5,000 adults’ dining out behaviour showed that, on average, just over one in five customers visited a restaurant in the past six months for a meal with family – that makes it one of the three most common occasions for dining out – and one in ten of those brands’ users visited for a meal with children. Therefore, it appears that healthy food and family orientated menu’s many bare most fruit for those in the restaurant industry.



In San Francisco, a deeply upset consumer has filed a lawsuit in the federal court alleging that he bought and ate boxes of Kellogg’s US product, Froot Loops, under the view that they contained real fruit (for those unaware of the appearance of Fruit Loops, simply imagine rainbow coloured Cheerios).

According to disgruntled Roy Werbel, Kellogg’s intentionally deceived consumers into buying Froot Loops by misleadingly using the word “froot” in the title. Had Werbel known that the cereal contained no fruit, he would not have purchased it, his suit alleges. – What a froot cake…


Market prices have been severely affected by international weather conditions this quarter. Droughts in one part of the world or another, and floods in other key areas, have coincided to reduce global crop yields and in turn may offer a minor part of an explanation for the continued climb of beef and pork. However, despite current levels persistently increasing, beef herd numbers are forecast to rise in the near future so there is at least some optimism for price falls in that sector.

Similarly, Shock Force majeur increases were enforced on milk which threatens to bode poorly for dairy prices that are bound to follow. Furthermore, despite early forecasts for Western economies food prices being estimated at around 2.5 – 3%, the rate has actually increased well beyond this through to 3-5% in the late summer.

Though not as impactful as climactic fluctuations, the exchange rate has further unsettled food prices in the UK due to the instability of the euro. Encouragingly, however, the rate of inflation may settle back to the lower rate in first half of next year as recessionary factors take hold through discounting, decreasing crude oil prices and the pound strengthening slightly against the Euro.

However, it is important to reiterate what we have stated in the opening RPI summary and to recognise that these short term increases have not stopped the overall, positive decline in RPI in the long term. As a result of these brief hikes there may be a period of levelling off similar to the one seen from February to May this year, but overall the enduring trend for the medium term is optimistic.