Food inflation forecast

Food inflation forecast

The rate of food inflation, which peaked at 19.2% in March 2023, has slowed, reaching 10.1% in October 2023. This decline in the rate of food inflation is encouraging, with the IGD predicting its continuation into 2024. However, we must note that this does not imply an immediate halt to price increases. These will likely persist until at least the second half of 2024.

In order to predict future rates of inflation we can look at what food manufacturers are currently paying for raw materials. In October 2023, the ONS reported that manufacturers are still paying 9.1% more than a year ago for imported goods. This further indicates future price increases. Current factory output prices have been reported as 3% higher in October 2023 compared to last year. This will significantly affect the prices that consumers are paying in the future.

The rate of food inflation still sits considerably higher than the overall rate of inflation, published at 4.7% in October 2023 using the CPI methodology. Whilst this overall value has almost halved since the peak, it is still more than double the Bank of England’s official target of +2%. The rate of food inflation was five times higher than this target in October 2023, with prices around 30% higher than in October 2021 according to the ONS. Several factors have been contributing to this situation. These include the conflict in Ukraine, labour shortages, and climate change.

el nino effect

Additionally, current weather predictions indicate an imminent El Niño event in the winter of 2023/2024 (at the time of writing). The temperature this winter is expected to peak around +2°C against the seasonal average. This increase is likely to have detrimental effects on producers and exporters in the northern hemisphere. Regions in Asia, responsible for 90% of global rice production, will experience adverse impacts due to the warmer and drier conditions, which are incompatible with the water intensive nature of rice crops.

drought weather

At allmanhall we will work with suppliers to communicate any future supply challenges and will continue to negotiate down proposed price increases, advise on product alternatives and range management, and mitigate risks on behalf of our clients.

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