Care Home Management

The Care Home Decision Makers’ Magazine

Insight & Analysis

What’s in store for food prices?

By Mike Meek, procurement and sustainability director at allmanhall
Food price inflation is believed to have peaked at +19.1 per cent year-on-year in Q1 2023, which is broadly in-line with its previous forecasts, according to forecasts from the Institute of Grocery Distribution.

Inflation is now expected to fall slowly as 2023 progresses, ending the year at +8-1- per cent, and turning slightly negative in late 2024. Average inflation over 2023 is expected to be +14 to 16 per cent.

This offers a measure of good news for hard-pressed caterers, but food prices are not expected to fall back to previous levels within the forecast period.

The “unwinding” of food price inflation is expected to run behind general inflation, for several reasons, including:

  • Previous cost increases have not yet been passed on down the supply chain, margin pressure is intense
  • Prices for many basic food commodities remain elevated for now
  • Some costs are likely to be “sticky”, especially labour
  • Rising costs for regulatory compliance (eg: border management, environmental protection).

This means that food and drink will likely make up a larger proportion of inflation pressure as inflation declines. Currently, food makes up about a quarter of Consumer Price Index inflation pressure but, by the end of the year, it could be half.

Predicting the future
With so many uncertainties in the market, providing accurate forecasts and predictions is not an easy task. UK food manufacturers are still experiencing increases in the price of goods, and global commodity prices are still 50 per cent higher than pre pandemic levels, though the effects of Covid disruptions on supply chains are finally diminishing. Constraints on supply as a result of the war in Ukraine, coupled with its importance as a global food exporter and high gas prices, have contributed to keeping to keeping prices stubbornly high.

At home, there have been problems with the domestic chicken flock, resulting in a 31 per cent increase in the price for eggs.

Record low levels of UK rainfall in February affected crop planting, which is expected to reduce supply and drive up potato prices later this year. Abroad, poor weather conditions in North Africa and Spain have already had a dramatic effect on prices and availability of some fresh produce such as salads, capsicum peppers and tomatoes resulting in empty supermarket shelves.

On a positive note, some goods are going against the trend. Vegetable oil commodity pricesare falling and this should eventually flow through to lower product prices for caterers. Spring is a time at which dairy commodity prices begin to soften, with a drop in the average farmgate milk price. And the price of UK old season lamb is now 10.35 per cent lower than a year ago – good news for those who can afford to keep meat on their menus.

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