Food prices surge again in June as drought fears cause concern

Inflation in the foodservice sector reached 11.5% in June, the latest edition of the CGA Prestige Foodservice Index reveals.

All 10 food and drink categories in the Index moved upwards year-on-year, with three – fruit, dairy and oils & fats – recording inflation of more than 20%. Several categories surged month-on-month as the impacts on key commodities from Russia's invasion of Ukraine continued to mount.

Concerns were also growing about drought conditions in many parts of the UK in the wake of the recent heatwave. Strategies from the National Drought Group to deal with very dry weather could include a ban on farmers watering their crops in the crucial period of August and September, which would put root vegetables including potatoes under threat. Shortages of seasonal labour were adding to growers' problems by threatening their ability to get their product to market, while poor grass growth was impacting dairy and livestock yields.

Beyond the UK, drought has already been a major problem in Italy, with crops including tomatoes and durum wheat affected, and conditions across the rest of the EU were also causing concern.

Prestige Purchasing chief executive Shaun Allen said: "Instability continues to be the dominant feature of food and drink markets, and we predict that this will continue into 2023. It's essential for operators to mitigate the impact on gross margins by investing in skills and resource levels to effectively manage this volatile environment. Doing so in a timely manner can eliminate even these high levels of inflation."

James Ashurst, client director at CGA by NielsenIQ, said: "Drought is the latest in a very long line of threats to global foodservice supply, and alongside the ongoing war in Ukraine it means inflation is likely to remain high for some time. With consumers as well as businesses feeling a tightening squeeze on their spending, the outlook for all food and drink businesses remains challenging."