Foodservice prices rise in July despite easing in commodity markets

The foodservice sector has seen continued price rises in July at 1.6% over the month and year-on-year inflation stayed in double digits for the sixth month in a row, despite a drop in food commodity markets, according to the latest CGA Prestige Foodservice Price Index.

The sector is continuing to face high levels of inflation despite relief in some commodities, with prices in all 10 categories of the Index recording upward year-on-year movement, with two experiencing inflation of more than 20%.

Additionally, nine categories saw a month-on-month increase, with prices in two (Dairy, and Oils and Fats) climbing by around 4% from June.

However, CGA said the increases come despite a drop in food commodity markets. The FAO Food Price Index fell by 8.6% during July, as markets were encouraged by the resumption of grain exports through the Black Sea, better-than-expected crop harvests and the start of a global economic slowdown.

CGA said that various uncertainties, including around weather conditions, mean conditions are likely to remain extremely volatile. With 10 of the Environment Agency’s 14 areas now officially in drought, the National Drought Group has agreed a range of measures to support farmers and growers, but CGA the risk of reduced yields is now high.

The European Drought Observatory has meanwhile reported that nearly half of Europe is under warning conditions, leading to forecasts that summer crop yields may be 16% below average, which will push up the cost of the UK’s food imports.

Shaun Allen, Prestige Purchasing CEO, said: “Whilst welcome news, it’s too early to say whether the July easing in food commodity markets will continue. Instability continues to be the dominant feature of food and drink markets, and we predict that this will continue into 2023, with inflation increasing further this year before it falls.

“With so many other pressures it would be easy for operators to take the eye off the ball of managing supply prices, which in this market could be very costly.”

James Ashurst, client director at CGA by NielsenIQ, added: “July was another tough month across the foodservice sector, and any relief in price inflation seems likely to be temporary.

“Drought conditions are a particular worry as we look towards the remainder of 2022, and with consumers’ spending also under mounting pressure, conditions are going to remain tough for many months to come.”