Inflation and market movements - Q3 recap and Q4 forecast

7 October, 2024

The last quarter has seen Consumer Prices Index (CPI) inflation remain relatively stable, 2% in May to 2.2% in August.

The market was less volatile than in previous recent quarters. Challenges persisted with quality and availability concerns, with Potato and Coffee prices rising rapidly. The conflict in the Middle East continues to disrupt Red Sea shipping routes with Freight Prices tripling in the past 12 months.

Let’s recap in more detail and understand further what we foresee in the next quarter...

PORK

Demand for Pork has been below expectation over the past 3 months. The grilling season has impacted this with heavy rain resulting in fewer days suitable for barbecues.

Supply levels have remained steady over the past couple of months, and this is expected to continue into October. Buying interest has been particularly high for Pork Belly and Streaky Bacon from the likes of South Korea and Japan. This has put cost pressures on these cuts, but as a whole pig prices have remained stable.

COFFEE

Arabica Coffee prices have risen significantly over the last quarter, and prices are anticipated to remain elevated. This is largely due to sporadic frosts in Brazil’s key growing areas impacting supply, whilst demand has been growing and this is anticipated to continue.

On top of this, Robusta Coffee costs are materially up in the past month. Revisions to Brazil’s recently-harvested conilon crop have played a major role in these increases. The 2024/2025 crop is estimated at around 20m bags – roughly 10% lower YoY.

CHOCOLATE

Cocoa prices have been severely impacted because of the El Nino weather phenomenon, which has caused dry harvest conditions in key cocoa-growing regions of West Africa.
With cocoa prices up significantly since the start of the year, it is anticipated that Chocolate prices will reach record highs in the coming months.

POTATOES

Significant challenges continued to be experienced over the past few months due to wet weather, leading to widespread shortages of Potatoes across the market. UK supply fell short of demand by approximately one million tonnes. Quality concerns also increased as we approached the end of the season in June and July.

Harvesting of the early crop has begun, but quality remains inconsistent. As is typical with the first harvest of the season, some quality issues are expected, including loose skins and green tops. There is likely to be a shortage of Small Potatoes (Mids) this year, driven by a surge in demand that supply has not been able to meet. The upcoming season is anticipated to be challenging.

Improved weather conditions have contributed to better quality in the new potatoes being harvested so far. However, a clearer assessment of overall quality will only be possible in November, once most of the crop has been harvested.

FISH & SEAFOOD

After a challenging first half of the year with 12 named storms disrupting the market, the third quarter brought much-needed stability. Favourable weather conditions played a crucial role, allowing British fishing boats extended periods at sea, which boosted the supply of fish to healthy levels. Warmer weather helped drive favourable pricing for Mackerel, Lobster and Crab.

Salmon prices dropped as Norwegian farmers began releasing large volumes of stock from pens, contributing to a supply-side deflation.

Farmed Bass and Bream prices were higher than anticipated. Interestingly, Bass was priced lower than Bream, an unusual occurrence driven by biomass issues in the farms.

Q4 Outlook

Below we're outlined our predictions and forecasts for the final quarter of 2024, delving into specific food and drink categories...

POULTRY

Turkey prices in 2023 remained relatively flat throughout the festive period, following on from a very challenging 2022 due to Avian Flu outbreaks, resulting in very steep price increases.

2024 is expected to see some supply issues, more specifically on the fresh side. Turkey pricing has already started to rise as we head into October, with further increases expected through November and December. Some large UK Turkey producers have shut down their facilities in recent months and there are concerns around further closures. Some producers may leverage these disruptions to push prices even higher, especially as they anticipate increased demand and possible panic buying from the retail sector.

To help mitigate costs heading into the festive period, we would recommend purchasing previously Frozen Turkey where possible.

Chicken prices have remained steady for the past 18 months; however, inflation has started impacting the market in the past couple of months.

There are two key reasons for this:

  1. Newcastle disease outbreak in Brazil has resulted in the culling of thousands of birds. These supply issues in Brazil have put more pressure on EU exports, with increasing demand. Although the Newcastle Disease outbreak officially ended August 1st, supply from the country remains disrupted due to ongoing import restrictions in some countries.
  2. There is an industry shift starting in the UK, with more emphasis being put on producers to reduce their stocking density in factories, allowing birds more space to roam. With the same space, but less birds in the factories, this is reducing supply and increasing prices. It is still in its early stages, but we do anticipate increases to continue into the early stages of 2025.
FRUIT & VEG

A 7% reduction in seed area across the UK and Europe is expected to result in similar planting levels as last season for Potatoes. This is likely to result in ongoing supply issues persisting through the 2025 crop season (June/July).

Top fruits are under cost pressure due to widespread yield reductions across Europe (estimated to be down by around 11%). Key regions like Poland are expected to see reductions as high as 25%. The lower yields are a result of late frosts and hail, which impacted blossom formation and, in turn, reduced availability. Coupled with rising labour costs and increased demand from the juice sector, costs are expected to continue rising.

Rising labour costs are the primary driver of increased prices for Mushrooms, as the industry faces competition from more favourable markets. Additionally, compost costs remained elevated due to ongoing straw shortage and high energy costs.

Root Vegetable growers faced difficult conditions when planting the new season crop, due to flooded fields making drilling a challenge. However, recent improved weather has allowed the crop to catch up.

FISH & SEAFOOD

Salmon prices should remain lower than of late at the start of the quarter. However, they are expected to rebound as Norwegian farmers freeze stocks at current low prices to capitalise on higher demand and pricing during the Christmas season. ChalkStream Trout would be considered as a stable-priced alternative to Salmon during this period.

Frozen Norwegian Cod prices are currently at an all-time high and are expected to stay elevated. The 2025 quotas have been set 20% lower than the prior year, which will continue to put pressure on pricing indefinitely.

Following the spawning season, British Shellfish are returning to the market. Favourable pricing will be expected in the coming quarter, making it a prime time to consider featuring these on menus.

FINAL WORD

Regency continue to proactively mitigate availability issues and supply risk, putting solutions in place to reduce impact, such as product switches and recipe re-engineering.

When analysing the affects that inflation has on your businesses purchasing, it's important to understand that inflation affects not only the price of goods, but also the quality and availability - this is something that our team of procurement experts can assess in detail, to ensure our members are always achieving the best outcomes in all areas. To find out more about ways in which we can help save your business time and money, get in touch.

Sources: Foodbuy, ONS, Birtwistles, Dole, A David.

Share this article:

Stay connected

Enter your email address to be kept up to date with latest news, company developments and market insights. You can unsubscribe at any time.
View our Privacy Policy.