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CGA Prestige Foodservice Price Index (FPI)Sub Category Report - June 2017

Your source for accurate data, analysis and insights into today’s food prices.

2

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Twoofthemostsignificantchangesthismonthcanbeseenindairyandfruit, though for

differingreasons.

InflationintheDairycategoryforMayis9.9%,asignificantincreaseonthepreviousmonth.

Farmgatepricesformilkhavebeenrisingformanymonths,andthoseincreasesarenowbeingfeltin

foodservice.Processeddairyproductssuchascream,butterandcheesehavecontinuedtoincrease

inpricesignificantlyabovethatofmilkitself,drivenbyhighglobaldemand,especiallyfromChinese

importers,andlowstocks.Whilesomeshiftsfrombrandedtoownbrandproductshavehelpedto

keepthelevelofinflationdown,theadditionalsharprisesindairyproductsduringthepastcoupleof

monthshavenowcomethrough.

InflationinFruit sitsat12.7%inMay.Asamajority-importedcategory,thecumulativeeffectsof

theweakenedpoundhavetakenatoll,especiallywhencomparedtothemuchstrongerpoundinMay

2016.Diseaseandpoorweatherhavenothelpedeither,with‘greening’oncitrusfruitproduction

inFloridaandValenciaandunfavourableweatherinkeygrowingregionsacrossEuropeandtheUK

bothaffectingsupplies.Undersuchtryingconditions,itisnosurprisethatimportsoffruitcontinue

tocostmorecomparedtolastyear.

Numerousmorefactorsarecontinuingtoaffectfoodanddrinkprices,includingOPEC’s

diminishedcontroloveroilprices,theeffectofanunpredictablenewUSpresident,andmorelocalissuessuchassealiceinfectionsdrivingupScottishsalmonprices,theuncertaintycausedbythe

GeneralElectionandtheongoingBrexitnegotiations.Inlightofallthis,foodbusinesseswillneedto

bemoreinformedandactivethaneverinmanagingtheircosts.

InflationintheFoodservicePriceIndex(FPI)isat9.0%forMay2017,upfromthe5.8%reportedlastmonthandasignificantriseonthe2.9%

recordedatthestartoftheyear.TheinflationarymovementintheFPIfromApriltoMayissignificant,andthegapinfoodinflationbetweenthisand

theConsumerPriceIndex(CPI)hasbecomemoreprominent.

Pricesremainhigheryear-on-yearacrossallcategories,withnotablejumpsforfruitanddairyproducts.Thelasttimeinflationwashigherthan

thiswasinAugust2008,whentheCPIreportedfoodinflationat14.5%.Somefactorsimpactingfoodpricesarecommontoboth2017and2008,

includingsignificantdepreciationofSterlingandsharpincreasesincertaincommoditymarkets.Butthesearenottheonlyfactorsandshouldnotbe

usedinisolationtodrawanyconclusionsaboutwherefoodinflationmightendup.

AbouttheCGAPrestigeFoodservicePriceIndex(FPI)

Food & Non-Alcoholic Beverages - FPI vs CPI

Executive Summary

CGA-Prestige FPI Report - June 2017

9.0%

333

FPICategoryReportJune2017

All findings for May 2017 relative to May 2016

Category

107.3

101.7

103.1

105.5

94.5

98.3

96.6

106.9

99.8

106.3

101.8

96.3

106.5

102.8

99.4

105.1

107.7

95.1

101.5

99.4

Jan 17Jun 16

98.2

104.3

106.3

106.0

99.3

103.4

105.7

110.2

101.4

100.0

101.7

97.0

99.0

101.3

99.2

103.9

106.4

102.3

101.0

99.1

Jul 16 Oct 16

103.4

102.1

107.5

107.6

98.5

101.5

101.2

98.9

101.0

103.4

May 16

100.9

96.9

106.9

101.8

97.7

105.0

107.0

103.0

102.0

97.8

99.9

99.0

101.2

101.3

99.4

101.7

104.6

95.6

99.8

99.8

Aug 16 Nov 16

104.0

102.1

102.3

107.4

99.8

101.3

101.6

106.2

104.3

103.6

Sep 16 Dec 16

104.9

104.3

101.5

109.4

95.1

97.7

97.7

107.0

101.8

103.0

Poorprojections

forwheat

pushingprices

up,asare

increasesfor

butter.

Sugaroutlook

better,cocoaset

torisesoon.

Oliveoilprices

stillrising,

butterprices

alsogoingup.

Suppliesofsugar

predictedtobe

constrained,

couldhalt

pricefalls.

Farmgateprice

trajectoryfor

milkuncertainas

risesannounced

forJuly.

Beef,porkand

lamballmoving

upwards.

Poorexchange

ratesstrongly

affectingfruit,

asareshortages

ofworkers.

Aslastmonth,

sealiceproblem

continues,cod

andtuna

pricesrising.

Teapricesrising,

cocoatorise

soon,while

exchangerates

alsokeep

pricesup.

Shortageof

migrantworkers

nowhavinga

notableeffect

onprices.

Foodservice Price Index May 2017 +9.0%

102.3 105.2 110.0 110.4

102.3 107.5 109.2 112.2

103.6 104.0 107.2 114.1

97.0 101.0 102.0 109.2

100.1 103.1 103.3 106.6

100.2 103.5 105.6 109.7

107.2 116.5 106.9 110.6

104.3 106.6 105.0 102.8

104.7 108.1 105.9 111.7

Feb 17 Mar 17 Apr 17 May17

106.6 108.4 106.4 110.6


ForMay,month-on-monthpriceincreasesareshowingforalmostallcategories,saveforaslightfallinAmbientHotBeveragesaswellasthesugar-

ledChocolate&Confectionary.Year-on-year,thismonth’sfiguresrepresentpre-Brexitvspost-Brexitforthelasttime,asJunewillfeaturesomeof

thepost-Brexiteffectsfeltin2016,especiallytheinitialdropinexchangeratesfollowingtheEUreferendumresult.

Category Summary

4

FPICategoryReportJune2017

ThegraphicbelowshowsFPIperformanceoverthepastyear,alongwitharollingone-yearforecast.Withinflationnowat9.0%,ourprojection

showspricesstabilisingfollowingtheupheavalcausedbytheinitialreactiontoBrexit.

Historical Performance & Forecast

Jan 17

101.8101.3 106.0

Jun 16

101.8

Apr 17

101.4

Feb 17 Mar 17

100.2 109.2

Jul 16

102.8

May 16 May 17

102.2101.1

Aug 16 Sep 16 Oct 16 Nov 16

101.5

Dec 16

102.4 106.7


Whileoilpriceshavemovedupanddownsincetheconfidence

inspiredbytheOilProducingandExportingCountries(OPEC)

woreoffatthebeginningofMarch,theoveralltrendseesprices

headingdownwards.Thismovementisfuelledinmultipleways,

fromOPEC’sdiminishingabilitytocontroloilprices,non-OPEC

countriessuchastheUSrampinguptheirshaleoilcapabilities,to

themovementtowardsalternativeenergysources.Theongoing

failureinrelationsbetweenSaudiArabiaandQataralsoadds

uncertainty.

ThefinalresultoftheGeneralElection,whichsawthe

ConservativesforcedintoanagreementwithNorthernIreland’s

DUPtocoverfortheirlostmajority,hasalsodestabilisedthe

expectedcourseofBrexitnegotiations.Thedetailsofthedeal

withtheDUP(aswellaspoliticaldiscontentoverhowitwas

reachedanditsimplicationsfortheNorthernIrelandpeace

process)couldcausefurtherupsetsoon.

FruitandVegetables,asacategory,shouldbewatched

carefullyinthecontextofongoingBrexitnegotiationsdueto

theimpactofmigrantworkersonthesecategories–agrowing

perceptionoftheUKasxenophobic,togetherwithaweaker

poundimpactingthevalueofpaythoseworkerswillreceive,have

combinedtomaketheUKalessattractiveplacetowork.Some

farmershavealreadywarnedofproducebeingleftunpickeddue

tothoseshortages,andwithveryfewintheUKwillingtostepin

andfillthoseshoes,thiscouldhaveamajorimpactastimegoes

on.

Overall,whilethegenerallevelofinflationthismonthis

significant,weprojectthatthosedifferencesshouldevenout

acrossthemediumterm,ascomparisonsstopbeingpre-Brexitto

post-Brexit,andbegintoreflectthe“newnormal”.Whilefurther

pricerisesarealmostcertainlyahead,barringanyunpredictable

eventsweshouldseesuccessivechangestotheindexbecome

lessdramatic,asdemonstratedbyourgraphabove.

100.2

101.3102.2

102.8101.8

106.7

109.2108.4

112.9

98.0

102.0

106.0

110.0

114.0

May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18

FPI - 13 Months Low Forecast High Forecast

5

Breadandcerealpricesareupby4.8%comparedtothistimelastyear.Whileunexpectedlywarmanddryweathercontinuestoaffectgrowthinthe

UK,globalfactorsalsoplaytheirpart,withUSwinterwheatdisappointing,whilefactorsatplayinRussian,UkraineandKazakhstanalsopushwheat

pricesup.Butterpricesarealsoservingtopushthiscategoryup.

Bread & Cereals

Globalwheatpriceslooksettogouponcemore,dueto

unexpectedlydisappointingyieldsforhardredwinterwheat,blamed

onhot,dryweatherinsomeofthebiggergrowingregions.Thisisalso

exacerbatedbymovesbysomefarmerstodiversifyawayfromwheatto

moreprofitablecrops.Poorprojectionsforotherglobalwheatharvests,

suchasthosefromUkraine,KazakhstanandRussiaarealsoservingto

pushpricesup.

HereintheUK,theongoingBrexitnegotiations,coupledwiththe

continueduncertaintythattheGeneralElectionfailedtoquell,will

meanthatexportscontinuetolookattractive,whilestockstightenin

theshorttermduetothecontinueddryweather.

Whilesugarpriceshavecomedownslightlyoffthebackofincreased

productionbyBrazil,theincreasingcostofbutterisasituationthathas

notgoneunnoticed–Frenchbakeryassociationshavenowbegunto

considerthematteramajorcrisis.

FPISub-CategoryReportJune2017

CurrentinflationFPI | 4.8% 12mthForecast | 3.9%


98.497.8

97.1

98.597.9 97.6

98.5

99.8 98.0

99.9

100.3101.1

100.5

101.7

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98.397.7

100.1

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106.6

96.0

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104.0

108.0

May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17

CPI - 13 Months FPI - 13 Months

6

Hotbeveragepricesareup10.4%year-on-year,althoughcomparedtolastmonthpriceshavefallenforcoffeeandcocoa.Teaprices,however,have

goneup,asteafromtherecentlowerproductionperiodstartstobeauctionedoff.Adverseweatherisonceagaintoblameforthis,andthisseems

likelytocontinueintheshortterm.

Ambient Hot Beverages

CoffeepricesarenowmovingdownwardsforbothArabicaand

Robustavarieties,dueinparttospeculationbycommoditybuyersthat

pricescouldgolowerinfuture.Thiscanpotentiallybecounterbalanced

tosomedegreebyroastersbuyingandholdingontothebeansrather

thanprocessingthem,inanticipationofpriceincreasesinthenear

futuremakingitmoreprofitabletobuildupstockpiles.

Theproductionoutlookforthe2017/2018coffeecropisstillgenerally

positive,however,sothisanticipatedriseinpricesmaytakelongerto

arrivethanexpected.

Whilethepriceofcocoahasfallenacrossthelastfewmonthsdue

toplentifulsupply,therearenowsignsthatpriceswillincrease–the

cocoafuturesmarkethasshownfallingpricesbeginningtoevenout

andcurveupwardsonceagain,asignthatthecurrentharvestseemsto

beslowing.Itshouldbeborneinmind,however,thatforIvoryCoast

thisisthesmalleroftwoannualharvests,withthelargerduetostartin

October.

Assumingnounexpectedweathereffectsorotherexceptional

pressuresonthecrop,thiswouldresultinsuppliesbeingbuoyed

upagainandpricesheadingbackdown,butthereisevidenceofdry

weatherinsomegrowingregions,whichcouldaffectearlycropgrowth.

TeapricesinIndiahaverisen,duetoacombinationofreduced

productionearlierintheyearandhigherdemand–astheteafromthat

reducedproductionperiodisnowbeingauctionedoff,theeffectsof

tightersupplywillmakethemselvesfelt.

Onceagain,thislowerproductionisbeingblamedonpoor,dry

weatheraffectingcrops,andthisisnotconfinedtoIndia:SriLankanand

Kenyanproductionhasalsobeenaffectedbyadverseweather,which

willcauseincreasingupwardpressureonteapricesgoingforward.




101.0

100.5 100.2

101.4

100.3

98.5

100.1

98.8

100.3

104.5

103.5

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103.8

99.9

101.8 101.7100.9

98.2

103.4104.0

107.3

104.9

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96.0

100.0

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108.0

112.0



7

Fishpriceinflationisat15.7%comparedtoMay’16.

Fish

Ashasbeenthecaseinpreviousmonths,tacklingsalmon’ssealice

problemisanexpensiveundertakingwithnosinglecompletesolutionyet

tohand.Whiletheindustryhasbeguntolookbeyondheatandchemical

treatmentstootherremediessuchascleanerfish(specificallywrasse),the

longlifecycleofthesehelperfish,aswellasconcernsovertakingthemout

ofthewild,meanthattheremaynotyetbeenoughtoprovideasolution

everywhereitisneeded,andenvironmentalconcernsthatlimittheir

availabilityfurther.

Inthemediumterm,Norway’sNordeaBankbelievethatfarmed

salmonproductionwillbeupby12%inthesecondhalfofthisyear.

Lookingmoreattheglobalmarket,Chilecontinuestorecoverfromthe

toxicalgaethatdevastatedtheindustrylastyear,whichwillservetoadd

additionalfishtoglobalstocks,relievingsupplypressure.

Lookingattuna,pricesinThailandhaverisensharplyrecently,affecting

Thaitunacannerswhohavehadtoturntheirfocusawayfromproducts

forhumanconsumptiontowardsotherlinessuchaspetfood,wherethe

yieldisgreater.

ConcernaboutdecliningAtlanticcodstocksintheBarentsSeahave

continuedtopushcodpricesup,asmovestocutquotasby20%for2018

havebeenrecommended.Thepoorerharvestshavealsoputadded

pressureonfrozenfillets,forwhichpricesarenowbeginningto

approachthoseoffreshAtlanticcod.




95.8 95.898.4 98.1

96.8

99.6

99.3 99.9 100.2

104.8104.8

103.5

105.8

95.6 95.1

102.3 103.0

110.2

98.9

106.2 106.9 107.0 107.2

116.5

106.9

110.6

92.0

96.0

100.0

104.0

108.0

112.0

116.0



8

Fruitpriceinflationhasincreasedto12.7%,astheeffectsofthisyear’sbadweatheronfruitharveststaketheirtoll.

Fruit

Bananapricesarelikelytocreepupwardsintheshorttomedium

term,duemoretoglobalmarketeffectsthanissueswiththeUK’susual

suppliers.

SeveralproductionareasthatmainlyservetheUSmarket,for

example,haveseendelaysorreducedqualityandsupplydueto

badweather,withEcuadoraffectedbyheavyrainfall,andcold

temperaturesaffectingthesupplyoforganicbananasfromMexico

totheUS,wherethereisincreasingdemandfororganicandpremium

products.

ArecentreportbytheUSDAshowsthatexpectedorangevolume

forthisyearhasbeenadjusteddownwardsby1.4%,offthebackof

virusesdecimatingtheItalianharvest,onlypartiallycompensatedfor

byhealthyproductioninSpain.Peruvianproductionhasbeensteadily

increasingacrossthepasttwoyearsalso,whichwillhelptofurtherplug

gapsinsupply,butnotwithoutcost.ComparethistoBrazil,also,which

hasseenthesmallestcropin10years.

Citrusgreeningalsocontinuestobeaseriousissueinotherparts

oftheworld,especiallyinFlorida,wherethediseasecontinuesto

seriouslyaffectcrops.Greening,alsoknownbyitsChinesenameof

“huanglongbing”orHLB,doesnotyethaveafoolproofmethodof

prevention,leadingtogrowerslookingatalternativecrops,butthiswill

notaddressthedemandforcitrus,andsoUSbuyerswillneedtolook

elsewhere,addingpressuretoglobalsupply.

Theothertwofactorsthathaveaninfluenceonfruitingeneral

aretheongoingaftereffectsoftheweather,andtheexchangerate

betweenthepoundandothercurrencies–ittakessometimeforthe

effectsofexchangeratechangestocomethrough,butevencomparing

theexchangerateof€1.36/£1atthestartof2016to€1.17/£1atthe

startof2017,onecanseethatourpurchasingpowerhasdefinitely

weakenedovertime,withknock-oneffectsforanycategorythatis

majority-imported,suchasfruitorhotbeverages.




100.3

99.3

97.8

98.8

101.1102.3

105.6 105.6

101.2

102.5 103.7

103.5 102.9

101.2

106.5

99.0

106.9 106.3107.5

102.3 103.1101.5

103.6 104.0

107.2

114.1

96.0

100.0

104.0

108.0

112.0

116.0



9

Meatpriceinflationisat11.9%forMay,asbeefsuppliesarelower,porkcostsarehigherandlambcontinuestoregainpopularity.

Meat

Domesticbeefprices,alreadypotentiallyaffectedbypoor

winterandspringweathercuttingdownongrazinggrass,

arefurtherconstrainedbyreducedproductionandhigher

demandinScottishbeef.Lowercarcaseweightsfurther

contributetothatreducedproduction.

Bycomparison,Irishbeefhasfalleninprice,butwhile

thismightnormallyservetocounterbalancedomesticprices,

movestowardsfocusingonBritishBeef,forexamplethe

Co-Op’srecentmovetowardsBritish-onlyfreshmeatinall

theirstores,hasreducedthepotentialimpactsomewhat.

Porkpricesarealsohigher,withavarietyofcutsincreasing

inpricesincelastyear.Mayfarmgatepricesforporkand

pigproductswerealsoupsignificantly,recordinga36.6%

increasecomparedtothesameperiodlastyear.

Chickenpriceshavesofarremainedrelativelystable,with

noseriousreportsofadditionalcostsorissuessurfacing

followingtheavianflualertearlierthisyear.

UKLambpriceshaveriseninpriceacrossthelastfew

weeksinJune,bothforoldseasonlambsandspringlambs,

bringingtheaveragedeadweightpriceup,asdemandgoes

upandslaughternumbersreduce,atonepointdown13%

comparedtothesameweekinMaylastyear.




95.296.3

95.0 95.4 95.3 94.8 95.095.9 96.2 96.6 96.7

97.5 97.2

99.8 99.4 99.197.8

100.0

103.4 103.6

106.3

103.0

104.7

108.1

105.9

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92.0

96.0

100.0

104.0

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10

Pricesindairyareupby9.9%year-on-year,inkeepingwiththesteadyincreaseoffarmgatepricesuptonow.Whilepricespaidtofarmersdippedin

May,forJuneitlooksasthoughtheymaybeabouttoheadbackup.

Milk, Cheese & Eggs

Continuedrisesincommoditypricesfordairygoodssuchascream,

cheeseandbutterfailedtobereflectedinthefarmgatemilkprices

paidbythemajordairyprocessorsinJune–fiveoutofsixofthemajor

namesintheindustrybroughtpricesdownforthemonth.

Thereisanindication,however,thatthiswillbequicklyreversed–Arla

Foods,havingbroughtitspricedownby0.4pperlitreinJune,will

increaseitby1.65pperlitreforJuly.Giventhattypically,whereone

processorgoes,theotherswillfollow,theyarelikelytofollowsuit,ifnot

inJulytheninthemonthsbeyond.

Asmentionedelsewhereinthisreport,butterpriceshavecontinued

tomoveup-followingabriefdroparoundthebeginningofFebruary

thisyear,theendofMaysawsomemarketpricesforbuttershootup

oncemore,endinguphigherthanatanypointoveratleastthelast

20years.

Thisnaturallyhasaknock-oneffectacrossmorethanjustthis

category,alsoaffectingBread&Cereals(anybutterpastryisgoingto

becomemoreexpensivefollowingtheserises)aswellasOils&Fats,

wherebutteralsofeatures.




97.0

95.596.9

96.7

95.8 95.7 96.0

96.5 96.0

96.6

98.297.4

98.299.4 99.4 99.2

97.7

99.398.5

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94.595.1

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101.0102.0

109.2

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11

PricesforSoftDrinksareupby7.2%year-on-year–theincreasedcostoffruitandtheweakenedpoundcomparedtolastyeararesignificant

culpritshere.

Mineral Waters, Soft Drinks & Juices

Asnotedelsewhereinourreport,fruitpriceshavemovedup

comparedtolastmonthastheeffectsofpoorweatheracrosstheworld

affectsharvestsofmanyfruits.Theeffectsonorangegrowthwillbe

particularlyrelevanthere.

Sugar,meanwhile,hasmoveddownwardsastheendofEUsugar

quotasapproaches(primarilyaffectingbeetsugar),whileinBrazilnotonly

aresugarcaneharvestslookinghealthy,buttheyieldfromthatcropis

higherthanusual.

Shippingandpackagingalsomeanthatoilpricesfactorin–Brent

Crudepricescontinuetoslump,asOPEC’sattempttobringpricesback

upisunderminedbystrongproductionfromthosememberswhowere

exemptedfromcaps,aswellasothernon-OPECcontrollers.Attimeof

writing,BrentcrudeoilpricesfromICEsitat$46.42abarrel,andwhile

priceshaveswungupanddownsincethebeginningofMarchthisyear,

theoveralltrendsincethenhasbeenafallinprice.

OPEC’seffectivenessasacontrollerofoilpricesisalsounderthreat

duetotheongoingbreakdowninrelationsbetweenSaudiArabia(and

itsallies)andQatar,aswellastheaccelerationofUSshaleoildrillingin

responsetohigherprice.

TheexchangeratebetweenGBPandtheEuroisalsoafactor,having

reachedahighofnearly€1.20/£1,thenfallingawayfromApril18th

onwards,thedatetheUKGeneralElectionwasannounced.Attimeof

writingitsitsaround€1.12eurostothepound,astheresultinghung

parliamenthasdentedcertaintyintheUK’sdirectioninupcoming

Brexittalks.




98.9 98.997.2

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94.6 94.295.5

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12

InflationforOils&Fatsisat10.7%year-on-yearforMay.Oliveoilpricesarestillundersignificantupwardpressure,howeverbutterismoving

upwardsoncemoreassuppliesrunshortandexportdemandremainskeen.

Oils & Fats

OliveOilpricesarestillrisingastheeffectsofdisease,winterfrosts

andthemorerecentdryweatheracrosstheMediterraneanpersist.

Globalpricesforoliveoilareupby25%andarelikelytogohigher,as

productionestimatesremaingloomyinseveralkeygrowingregions.

Butterpriceshavecontinuedtomoveupwards,fromacombination

offactors;poorweatherhasaffectedgrazingconditions,supplyhas

fallenasmoreUKdairyfarmershaveleftthesectorentirelyorreduced

theirexposuretounprofitablefarmgateprices,demandfromoverseas,

especiallyChina,continues,anddomesticdemandisalsoup.

ThepressureonpricesisnotconfinedtotheUK,either–inFrance,

aspokespersonforthefederationofFrenchbiscuitandcake-makershas

alreadystatedthattheindustryis“underunsustainablepressure”,

witharealriskofbutterrunningout.

Pricesforsoyaoilandpalmoilhavealsocontinuedtofall,following

anxietyaroundanewtaxregimebeingintroducedinIndiathatcould

maketaxationonsoyaandsoyaoilmorecomplicated.

Onceagain,theweaknessofGBPservestopushuppricesforall

imports,exacerbatingexistingpricerisesandreducinganybenefitthat

mightbehadfromreducedprices,havingmovedfrom€1.20/£1to

€1.12sincelastyear.




98.8

99.698.2

101.7

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96.397.0 96.9

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109.7

94.0

98.0

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13

Whilepricesinthiscategoryarestillhigherthanlastyearby3.0%,theproportionalincreasehas,likepricesthemselves,beenreducingoverthe

lasttwomonths,asyoucanseeinourgraph.Thisismostlyfuelledbysugarpricesfalling,asBrazil’sproductionsofarthisyearlookshealthierthan

originallyexpected.

Sugar, Jam, Syrups, Chocolate & Confectionary

Priceestimatesacrossvariousglobalmarketshavecontinuedto

movedownwardsaspredictedoutputbymajorgrowersofsugar,

includingbeetsugarintheEUandcanesugarfromthelikesofChina,

ThailandandBrazil,continuetolookpositive.

Brazilisnotonlyproducingmoresugarcane,buttheyieldfromthat

canehasbeenhigherthanexpected.Thisislikelytokeeppriceslowfor

somemonthstocome.Astheprimaryingredientforthiscategory,this

abundanceofsugarwillbethemainreasonthatactualprices,asshown

inourgraph,havecomedownacrossthelasttwomonths.

Cocoaprices,meanwhile,arelikelytoincrease,atleastintheshort

term–thecocoafuturesmarkethasseenpriceseveningoutand

comingbackup,asignthatthecurrentharvestseemtobeslowing.

Ofthetwomaingrowers,however,IvoryCoast’smainharvestisdue

tostartinOctober,whichwillserve,barringanyunexpectedevents,to

replenishstocksagainandsendpricesbackdown,butthereisevidence

ofdryweatherinsomegrowingregions,whichcouldaffectearly

cropgrowth.

TheotherelementkeepingpriceshigherthaninMay’16isthe

weakenedpound–despitepricesformanyoftheinputingredients

goingdown,theUK’sbuyingpowerhasbeendentedbylowerexchange

rates,andthissituationislikelytocontinueforsometime.




99.7 97.6 97.8

99.9

97.0

98.0

96.6 96.6

101.4

98.2 98.6

99.9

101.4

99.8

101.5101.0

102.0101.4 101.0

104.3

99.8

101.8

104.3

106.6

105.0

102.8

94.0

98.0

102.0

106.0



14

Vegetablepricesareup9.2%onMaylastyear.WhilewarmweatherandtheonsetoftheBritishgrowingseasonbrieflybroughtpricesdown,a

combinationoftheweakerpoundandthefalloutofBrexitarenowcombiningtopushthemupagain.

Vegetables (including Potatoes)

Whilevegetablepricesdippedlastmonththeyhavenowclimbed

againinMay,notonlyduetotheincreasedcostofimportsdueto

theweakerpound,butalsoduetoincreaseddifficultyhiringmigrant

workers,avitalpartoftheindustryhereintheUK.

ArecentNationalFarmersUnion(NFU)surveyrevealedthat

therewasa17%shortfallofworkersinMayofthisyear,withfewer

workerswillingtoworkinaUKthatisincreasinglybeingperceivedas

xenophobic.Evenifthiswerenotthecase,thereducedvalueofthe

poundtranslatestoreducedwagesforworkerscomingfromabroad,

furtherreducingtheattractivenessoftheUKasaworkdestination.

Therearefewalternativessourcesforthislabourtoo–thesameNFU

surveyshowedthatonly14ofthe13,400workersbetweenJanuary

andMaywereBritish.

Theworseningexchangerateisalsoasignificantproblemforboth

fruitandvegetables,regardlessofwhetherthelabourortheproducts

themselvesareimported–eitherway,priceswillgoup,andifwemove

moretowardsimportsthandomesticproduction,wealsoreduceour

foodsecurity,increasingourrelianceonthoseimports.




95.594.7

95.994.8

95.9

94.1 94.495.2

96.3

98.5 98.7 98.897.7

101.3

102.8

101.3 101.8

106.0

107.6 107.4

105.5

109.4

106.6

108.4

106.4

110.6

92.0

96.0

100.0

104.0

108.0

112.0



PleasecontactCGAStrategyforquestionsrelatingtoresearchandcontent:

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CGAaretheworld’sleadingbusinessintelligenceandstrategicconsultancyproviderforthe‘outofhome’leisuremarket;thedefinitivesourceofintegratedconsumerinsightandmarketmeasurementinformingstrategiesforourclients’growth.Welive,love,breatheourindustry:

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