Poor weather has seen vegetable prices rise by 10.4% © 123RF
Poor weather has seen vegetable prices rise by 10.4% © 123RF

Vegetable shortage pushes up wholesale food inflation

28 February 2017

UK wholesale food prices increased 2.9% year-on-year in January, driven up by rocketing vegetable costs.

The Foodservice Price Index (FPI), produced by hospitality advisers Prestige Purchasing and CGA Strategy, revealed the increase was due the low supply and rising costs of basic goods including sugar, oils and fats and hot drinks.

According to the index, a dramatic 10.4% hike in vegetable prices mainly drove inflation, stemming from poor weather conditions across Europe that cut into the supplies of many common vegetables including lettuce and courgettes. This led supermarkets to ration or withdraw stock.

Christopher Clare, head of consulting and insight at Prestige Purchasing, said the spike reflected the immediate aftermath of the vegetable crisis

“What we are seeing in this month’s Foodservice Price Index figures is the pass-through of sharp increases in the commodity prices of many imported salad products and vegetables,” he said.

“Whether it reflects the full extent of the increases remains to be seen, and next month’s figures will be key.”

The rising cost of oils and fats were specified by the index as adding pressure on supply chain expenses, as prices had increased 9.5% from a year ago, partly because of low palm oil supply.

Prices of sugar-related products were also revealed to be up 4.9% because of lower exports from key markets and minimum price contracts introduced into the market by businesses across the sugar industry.

Coffee prices also jumped by 4.9%, as demand continues to exceed supply around the world, while tea prices had been hit by droughts in Kenya.

CGA Strategy chief executive Phil Tate said companies needed to be more vigilant when applying their purchasing strategies.

“The broad range of categories facing inflation is a cause for concern, and it makes the need for resourceful purchasing strategies and careful price monitoring all the more apparent,” he said.

Conversely, the index revealed some optimism with news that domestic production would soon kick in, reducing reliance on more expensive imports, and there was evidence that butter prices had started to fall.

Prices for milk, cheese and eggs also fell by 1.3% in January.

The Foodservice Price Index is an independently developed counterpart to the Consumer Price Index for the catering and hospitality sector and uses data drawn from more than 50% of the foodservice market and around 7.8m transactions per month. 

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