UK: Food Inflation May Rise 10 Percent Before Christmas

Chris Etherington, chief executive of wholesaler P&H, said: “I think this could be the beginning of the double-dip recession. This is really scary stuff.”

Again: This is the Greatest Depression! Prepare yourself now.

See also: Bank of England’s Mervyn King Warns Over High Inflation


The cost of food is likely to jump by up to 10 per cent before Christmas after dry weather drastically reduced the amount of winter feed that farmers could harvest, experts said.

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Wheat: expensive. (Getty Images)

The price of milk, cheese, chicken, beef and pork and associated products are all expected to rise because the industry has been hit by soaring animal feed prices, a shortage of silage and poor harvests.

Food inflation is closely linked to overall inflation and some in the industry have warned it could push the economy towards a “double-dip” recession.

BOCM Pauls, Britain’s biggest animal feed supplier, has reported a 20 per cent increase in the price of raw material feed on last year

The cost of wheat used as animal feed has also jumped by 30 per cent.

The company warned that the price at which it sells feed to dairy, poultry, beef and pig farmers would have to increase by the same amount over the next three months, trade magazine The Grocer said.

It is possible that such a margin could be passed on to consumers, however, it is unlikely to be passed on in full. Instead, prices are likely to go up while producers’ and retailers’ profit margins are also squeezed.

The National Farmers’ Union said the dry weather had added to its members’ problems by slashing the yields of silage for winter feed by up to 50 per cent.

Food producers are already suffering from the high cost of common ingredients such as palm oil, cocoa and soya oil, which have risen by 39 per cent, 23 per cent and 14 per cent respectively since last year, according to Mintec figures.

Farmers and food producers can use supplies from abroad to alleviate domestic problems, however, traditional sources such as Russia are suffering similar concerns.

A drought affecting a third of Russia’s crop zone is expected to halve exports, raising fears of a Russian export ban which would have a significant impact on UK food inflation.

Tom Vosa, chief economist for the Clydesdale and Yorkshire Banks, told The Grocer: “We expect to see an acceleration of food prices and a return to double-digit increases by early next year if the situation doesn’t change.”

Will Hayllar, a partner at financial analysts OC&C, said British consumers could expect a lag time of around six months before they saw the full impact on retail prices.

Peter Bradnock, the chief executive of the British Poultry Council, said his industry was “not in a position to absorb these increases”.

Chris Etherington, chief executive of wholesaler P&H, said: “I think this could be the beginning of the double-dip recession. This is really scary stuff.”

By Andy Bloxham
Published: 8:30AM BST 31 Jul 2010

Source: The Telegraph

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