Food inflation driving UK, US consumers to hoard for Christmas

London

GLOBAL food inflation is beginning to bite, so much so that consumers in the United Kingdom, the United States and elsewhere - fearful of shortages and future price hikes - have been snapping up everything from frozen turkeys to nuts and sweets several weeks before Christmas.

Key agricultural commodity prices are well above the levels seen at the end of 2019, just shortly before the start of the global Covid-19 pandemic.

Arabica coffee, which accounts for 60 per cent of the world's coffee production, has seen its price surge by as much as 77 per cent as Brazil, the main producer, has experienced a series of droughts and frost this year.

Robusta coffee prices have also jumped due to export declines from several countries including Vietnam, said the International Coffee Organisation, a London-based body that represents both producers and consumers.

"Weather-related shocks and potential disruptions in trade flows from stricter pandemic-related measures have become a serious threat to the regularity of coffee supplies," the organisation said.

What's more, increasing transaction, production and transport costs, including fertilisers and labour, are expected to reduce growers' gains from higher prices. As such, investments in production are expected to slow down.

Last month, cotton prices reached a 10-year high because of extreme weather as droughts and heatwaves damaged crops across the US, the world's biggest exporter of cotton. Albeit below its peak, cotton is still 67 per cent higher than what it was in 2019.

Rising temperatures have also cut yields of wheat (prices are up 53 per cent since the end of 2019), and corn (up 30 per cent) in the US, while Russia is among those that have restricted wheat exports.

Palm oil has soared by 68 per cent partly because of labour shortages in Malaysia, according to experts at a recent conference held by S&P Global Platts, a commodities news and analysis service.

Soyabeans rose by 36 per cent in the same timeframe largely because of the late arrival of the rainy season in India. There has been a knock-on effect as grains are also fed to cattle and chickens, so their prices have also risen as a result.

With the exception of coffee and palm oil, other agricultural prices are down from their peaks.

Larger US harvests, better weather in Brazil and signs of a decline in purchases from China are helping raise the availability of soya and corn. Despite all that, prices are still much higher than 2019 ranges.

Families in the UK and other parts of Europe are resigned to paying more for traditional Christmas goodies such as turkeys, pork, Brussel sprouts, potatoes, carrots and sauces, according to farmers and supermarkets.

Mintec, a commodities data company, blamed the higher prices of ingredients such as palm oil, brown rice, wheat, almonds and peanuts and packaging, energy and transport costs. Champagne and wines are also more expensive than before.

Sainsbury's, a British supermarket chain and general store, disclosed recently that it has been forced to delay its toy promotions. It warned that there would be lower stocks of electronic goods for Christmas as supply chain problems continue to challenge retailers.

Simon Roberts, the chief executive of the group, said that costs were rising before the festive season but the retailer would "do all we can to mitigate inflationary headwinds as far as possible".