With food manufacturers already facing a barrage of extra costs, latest data suggests that the pressure from high commodity prices is unlikely to ease any time soon.
The Food and Agriculture Organization’s (FAO) Food Price Index, which tracks international prices of the most globally traded food commodities, averaged 135.7 points in January, 1.1% higher than in December.
The Vegetable Oils Price Index was the main driver in January, increasing by 4.2% month-on-month and reversing its December decline to reach an all-time high. Palm oil prices were largely underpinned by concerns over a possible reduction in export availabilities from Indonesia, the world’s leading exporter, while soy oil prices were supported by robust import purchases, particularly from India. Meanwhile, rapeseed oil prices were pushed up by lingering supply tightness, and sunflower seed oil quotations were impacted by supply tightness and surging global import demand.
Boubaker Ben-Belhassen, Director of FAO’s Markets and Trade Division said: “Reduced export availabilities on top of other supply-side constraints, especially labour shortages and unfavourable weather, largely pushed vegetable oil prices up to an all-time high. There is a concern the impacts of these constraints will not ease quickly.”
The Dairy Price Index also increased by 2.4%, its fifth consecutive monthly rise, with the steepest increases registered for skim milk powder and butter. Cereal and Meat prices only edged up slightly, whilst sugar was the only commodity to post a decrease in January, down 3.1% from the previous month due to favourable production prospects in major exporters.
Consumer goods manufacturers around the world have been raising prices in recent months to offset higher energy, labour, supply chain, and commodity costs.
Figures released by Kantar earlier this week showed that grocery prices in the UK rose 3.8% over the four weeks to 23 January. It said prices were rising fastest in categories such as savoury snacks, fresh beef, and crisps, while falling in fresh bacon, vitamins, and beer.
NAM Implications:
- Suppliers closer to these categories have to take a realistic stance re the resulting shelf price increases.
- And reassess the impact on relative competitive appeal…
- …before deciding on their own increases in trade prices.
- (but above all, avoiding breaking faith with consumers via shrinkflation)
