This month, eight of the ten categories have experienced inflation, with significant movements for four categories: Dairy, Soft Drinks, Oils & Fats, and Fish. Two of the ten categories in FPI have experienced deflation this month. This month, eight of the ten categories have experienced inflation, with significant movements for four categories: Dairy, Soft Drinks, Oils & Fats, and Fish. Two of the ten categories in FPI have experienced deflation this month.
Maintaining its upward position on last year, Fish has experienced the most significant year on year inflation in FPI. Quota reductions for white fish are keeping prices high, and with no sign of total allowable catches going up, we can expect the year on year inflation to continue into the long-term. Despite the yearly inflationary movements, Fish has dropped on last month, as good availability of salmon is keeping prices low.
Oils & Fats has been experienced significant year on year inflation for several months, but things look to be softening. The year on year inflation for this month is lower than the recent past, and month on month the movements have been deflationary. A significant impact to the Oils & Fats market has been a decrease in crude oil pricing since late 2018 and strengthening of the Pound against the Euro and Dollar. The future of soybeans looks to be interesting, with mounting US stocks and China’s introduction of legislation to reduce the requirement on imported soybean creating a potential future global surplus.
With production costs up in light of feed shortages following last years harsh summer, Dairy has experienced high year on year inflation. The Milk to Feed Price Ratio recently dropped below the long-term average, contributing to the high position of this category in the Index. Despite being high compared with last year, Dairy has experienced monthly deflation primarily as a result of increased production thanks to healthy grass growth for use as silage following good rains, reducing the requirement on expensive feed. Milk production forecasts suggest an increase for this year, however the continued growth in demand is expected to remain stronger, and could see prices increase into later in the year.
Soft Drinks have been on a general upward trend since the Food & Beverage Index began and has now reached its highest point to date. Much of the rise can be attributed to a shift away from alcohol consumption, reformulation of products, and increasing varieties of adult soft drinks. With many brand owners set to adjust pricing in February and March in light of factors such as Brexit, currency fluctuations, and rising costs of production, Soft Drinks look set to keep moving up.
Shaun Allen, Chief Executive at Prestige Purchasing, said: The continued rise in year on year food and drink inflation for the sector will not be welcome news for Operators who are also facing a challenging trading environment. However, the future outlook is showing more positive signs that inflation could ease during the year with the index showing a number of categories falling back month on month and the recent improvement on exchange rates should also help, providing of course that the outcome of Brexit over the next couple of weeks does not lead to major disruption to availability of products from the EU and introduction of WTO tariffs.
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