FPI rises to 2.9%

Feb 21st 2017

Foodservice Price Inflation (FPI) rose to 2.9% in January, pushed up by increases in a number of key categories including oils and fats, hot beverages, sugar and vegetables.

Vegetables especially have increased dramatically, up by 10.4% compared to January ’16.  Much of this increase has come as a result of the adverse weather conditions experienced across Europe, cutting into supplies of many common items including lettuce and courgettes, and leaving suppliers struggling to find alternative sources.  Even supermarkets could barely keep up supply, rationing goods where stocks were limited, or else forced to leave some shelves empty.  Domestic production should start soon and we will hopefully see prices becoming more reasonable as this replaces imports.  

Oils and fats are also seeing price increases, with prices 9.5% higher than last year, which can be attributed to issues with palm and rapeseed oil supply, as well the ongoing high price of butter, although on that front we are also seeing market prices begin to fall here in the UK.

Sugar and related products are also up by 4.9% year-on-year – sugar supplies are projected to be lower in 2017 from the three main exporters, while domestic prices will be pushed up in the UK due to new minimum price contracts being introduced for some types of sugar.  

On the hot beverage side, tea is expected to be impacted by droughts in Kenya, the world’s largest exporter, while coffee supply still cannot keep up with demand and prices here are up 4.9% on last year.

Once again, the only category seeing any deflation is Milk, Cheese & Eggs, where prices are 1.3% lower than in January 2016, but this cannot continue for much longer – while buyers of cheese may have shifted their purchasing to less expensive alternatives, the reduced domestic production and farm-gate prices for milk continuing to rise will necessarily push up the price of all processed dairy products.