Food inflation falls - for now

Food inflation fell to a two-year low in July, the latest figures from the British Retail Consortium (BRC) have revealed, but the BRC has warned that pressure is building as feed prices continue to rise.

The BRC-Nielsen shop price index for July showed food inflation falling by 3.1% during July, down from 3.5% the month before, while overall shop price inflation slowed to 1.0% in July from 1.1% in June.

Stephen Robertson, director general of the BRC, said: “A two-year low for food inflation is good news for hard-pressed households still suffering falls in disposable incomes. Lower shop price inflation is helping to narrow the gap between living costs and wage increases.

“Extra promotions, particularly linked to party food and this summer’s big events, are combining with past falls in commodity prices, which are working their way through to shop prices.

“But the relief may not last. Poor harvests, especially of corn and wheat in the USA, are creating a build-up of inflationary pressure. Animal feed has risen sharply in recent months and is likely to affect prices for things like meat, poultry and eggs.”

The British Poultry Council (BPC) has also warned about this underlying pressures on the price of everyday items. Last week, the BPC, along with the NFU and British Egg Industry Council published a joint letter to retailers calling on them to reflect the rising cost of commodities due to poor weather conditions in their consumer promotions on supermarket shelves.
BCP chief executive Peter Bradnock said: “British poultry producers are coming under real pressure from global price rises. The costs of feed wheat, soyameal and corn – which are the key feed ingredients for the poultry industry and a number of other sectors – have been climbing and are set to increase further. Feed already makes up half the cost of an oven-ready chicken, so we would like retailers to reflect the sizeable cost increases in their pricing considerations and promotional schedules for the next 12 months.”

In the last few weeks Quality Meat Scotland (QMS) and the National Pig Association (NPA) have all warned that the rising costs of animal feed is having an adverse effect on pig producers. QMS’ head of economic services Stuart Ashworth said that despite a modest improvement in producer prices, feed costs remain a concern for pig and poultry producers, after feed wheat and barley rose 25% in a year, and soya bean meal rose by 40% in the year.

Mike Watkins, senior manager of retailer services at Nielsen, said: “Over the last few months we have seen difficult trading conditions due to the unseasonable weather. In food, promotions remain close to an all-time high and the focus on price cuts and the use of vouchers or coupons continues, as consumer demand is unpredictable. So shoppers are seeing a double benefit as external cost price pressures have also eased a little, which contributed to a further slowing in shop price inflation in July.”

Related news:

>Pig industry faces profitablity crisis again

>Cranswick: robust growth and strong gains.


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