Wholesale food prices are forecast to rise by 4%, while soft drink and hot beverage prices will increase 2% ©123RF
Wholesale food prices are forecast to rise by 4%, while soft drink and hot beverage prices will increase 2% ©123RF

‘Sharp rise’ in wholesale food prices predicted

6 December 2016

Wholesale food prices are predicted to rise by 3.4% in 2017, according to a pricing index.

Uncertainty around the UK’s future relationship with Europe, currency fluctuations and the outcome of the Donald Trump’s presidency could lead to sharp rise in inflation, it said.

The prediction comes from the Foodservice Pricing Index, and annual report compiled by supply chain management firm Prestige Purchasing. It forecasts wholesale food prices to rise by 4%, while soft drink and hot beverage prices will increase 2%.

The report said the low dairy prices seen throughout 2016 could push more farmers out of the market, eventually leading to prices increases. It said the wholesale price of butter had already doubled in the last few months because of low levels of milk production.

Pork prices, which were high in 2016 because of higher export levels to China, are expected to settle as the domestic market there recovers from the ill effect of El Nino.

Meanwhile salmon prices are expected to slowly decline as stocks start to recover from a bad year caused by disease. 

Future wheat prices were also predicted to remain stable or even fall because of increased global production and the possibility of end to sanctions on Russia, one of the world’s largest wheat producers, if Trump takes a softer attitude to relations that his predecessor.

However, the 4.6% cut in oil production agreed by OPEC was expected to contributed a “sharp rise” in inflation, said Shaun Allen, purchasing operations director at Prestige Purchasing.

Transport, shipping and packaging costs are all affected by the price of oil, but the effects were unlikely to be felt immediately as the resource is often stockpiled.

The report also predicts another hit to the UK’s exchange rates, regardless of whether Article 50 is triggered to launch the official start to exit negotiations. Allen said change in exchange rates had already added up to £10.8bn of costs to the sector.

The report comes a week after the firm urged buyers to review their contracts after identifying a growing gap between wholesale and retail prices in the sector. Prestige Purchasing said it had seen a 1.9% increase in wholesale price of foodservices this year to September, despite a 2.2% drop in consumer prices of equivalent products.

Wholesale prices are expected to contine to rise above consumer inflation, the report said.

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