Commodity Market Report Q1 2024
o Key commodity updates
o Global supply chain news o Cost of living update o Weather conditions o What’s in season
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Market Report | Quarter 1 2024
Welcome to the Market Report
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In this report, we provide the latest commodity market updates gathered from impartial market research, reliable news sources, and our team of supply chain experts. We cover key price trends and recommend ways to mitigate price increases. We also look at product availability and what produce is in season, to help inform your purchasing.
Alex Gess Business Supply Chain Analyst Pelican Procurement We’re here to help you. hello@pelicanprocurement.co.uk
Market Conditions Cost of Living The encouraging news of a diminishing inflation rate continues in the three months following our last update. From October to December, the overall inflation rate fell and remained steady at 3.9%, a relief for shoppers during this crucial time of year. Supermarket-specific inflation was reported at 6.7%, slightly higher than the general rate. This reduction is partly due to natural events, as price stability improved throughout the year. It was further supported by significant deals and discounts from major supermarkets aiming to attract shoppers. Almost 33% of purchases in December were discounted items and in-store offers. This mix of reasonable pricing, deals, and promotions led to a 7% increase in Christmas spending compared to the previous year, with a 2% rise in the number of items purchased. The holiday season positively impacted sales, with a reported expenditure of £13.7 million at
3.9%
R at e o f in fla t io n af t er
rep ea ted dro ps in 202 3
Tesco, Aldi, and Asda, showcasing particularly strong performances. Notably, supermarkets' own-label brands performed significantly better than in previous years. Sainsbury's and Tesco reported an 11% yearly increase in sales of their own-brand lines, indicating a shift in consumer purchasing behaviour. Beyond the holiday retail scene, other sectors of the economy have shown signs of improvement, with a projected growth of 0.5% for 2023 (compared to an earlier predicted shrinkage of 1%) and expectations of a 1.8% growth for 2024. Workers can look forward to a minimum wage increase taking effect in April, along with ongoing reductions in food prices and energy costs.
Climate Change The impacts of climate change are becoming increasingly evident, with noticeable changes in UK weather patterns and more extreme weather events globally. In the same calendar year, we've witnessed the wettest, hottest, and driest weather patterns ever recorded domestically and abroad. Multiple named storms are emerging as weather patterns
evolve. At the end of the festive period into the new year, Storm Gerrit and Storm Henk have already caused travel disruptions, flooding, and building damage, particularly in the Midlands and the South of the UK. The Met Office has issued multiple warnings, and disruptions are expected to continue and worsen, leading to school closures, delays or cancellations of trains and flights, and flood damage to roads, homes, and businesses. The impact of changing weather patterns is not limited to the UK; it also affects the supply chain globally. Throughout 2023, the Mediterranean experienced record-breaking temperatures, significantly affecting a region crucial for supplying Europe with Citrus fruits, Tomatoes, and Olives. The changing planting seasons, delayed by high energy bills, contributed to lower crop yields due to the drier-than-usual summer and autumn. This shortage in crops for export has led to price increases, affecting countries heavily reliant on importing such goods, including the UK. Beyond Europe, many Asian countries are grappling with reduced crop yields for staple foods like rice and palm oil. Thailand and India are predicting shortfalls in yield for the 2023
Market Report | Quarter 1 2024
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Two major sea transport routes are facing very different issues, causing a substantial slowdown in ship traffic. The Panama Canal and the Suez Canal are struggling to handle their usual volume of ship processing in a week. The Panama Canal is facing limitations due to poor weather conditions in South America. It's reported that by February, the canal will only allow 18 crossings per day, down from the usual 35 or more.
harvest and the 2024 planting season. India's struggles result from heavy and unpredictable monsoon seasons, while Thailand faces unseasonably dry conditions due to low rainfall. Both scenarios are attributed to the El Niño weather event, expected to continue raising temperatures and causing heavier rains throughout 2024 on a global scale.
Energy Pricing Fortunately, we are not witnessing the same drastic increases in the cost of energy that we experienced in the last two winter periods. The energy price cap increased by 5% for the January to March period compared to the previous three months. Despite this increase, there is no government assistance this winter to offset these bill increases. However, the cost remains well below the Energy Price Guarantee implemented last year to combat inflationary pricing. Barring any international incidents that could lead to another surge in pricing, like what was seen at the start of the Russian conflict, the April Energy Price cap is expected to be significantly lower as wholesale costs for gas and
electricity decrease in warmer weather. A positive development in the UK energy sector is the reduced reliance on gas and coal for electricity generation. In 2023, the country experienced the lowest consumption of fossil fuels since 1957, with a 20% reduction compared to the previous year. Domestic renewable energy accounted for 42% of the power provided. This shift away from old, polluting fossil fuels to clean renewable energy is a result of increased renewable energy generation, driven by consistently decreasing costs and simplified processes. Additionally, there has been an increase in nuclear and hydroelectric energy imported from France and Norway. This transition to clean, reliable energy sources is one of the reasons we anticipate a drop in the price of electricity from April onwards.
Global Supply Chain Changes in weather and political unrest have been significant disruptors to the global supply chain in recent months, and these challenges are expected to persist in the early months of 2024.
This reduction was already in place during November and December in the lead-up to Christmas. The impact is particularly felt by grain ships transporting wheat and corn throughout the Americas. With transit slots becoming more expensive and harder to obtain, the repercussions will likely extend to other continents. On the other side of the world, the Red Sea shipping route has its own set of problems, primarily linked to the conflict in Israel and Gaza. Yemeni rebels have attacked container ships in the Red Sea, prompting major transport companies to reroute ships around the horn of Africa. This rerouting adds 2-4 weeks to the travel time for goods and increases fuel prices. While these issues may seem distant, they do have a direct impact on the UK. Delays in container transfers lead to substantial backlogs at ports, as observed in the aftermath of the Covid pandemic. With ships spending more time on the water, up to 20% of the global shipping fleet is now operating on a delayed schedule, causing a ripple effect throughout the system. We will likely experience shipping delays directly linked to these incidents in the coming months.
Market Report | Quarter 1 2024
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Key commodity tracking Food & Beverage Chicken
Q-o-Q Change
Y-o-Y Change
-1.2%
-6.7%
Beef
+1.1%
+9.7%
Pork
-3.9%
+7.1%
Lamb
+7.1%
+8.4%
Cod
-13.5%
-30.4%
Salmon
+42.7%
+10.3%
Milk
+2.6%
+34.5%
+7.9%
-19.1%
Haddock Tuna
-18.2% -5.8%
-9.6%
-21.3%
Butter
+19.3%
Apples
+21.5%
+22.8%
Potato
+33.3%
+152.6%
-17.5%
+11.7%
Cheddar Mild Eggs
+8.4%
Tomato
+136.8%
Coffee Arabica
+18.7%
Sunflower Oil
-1.1%
Sugar
Coffee Robusta Rapeseed Oil
Non-Food
+14.3%
-6.6%
+97.3% +9.7%
+29.1%
+56.4%
-16.9%
-26.1%
-28.3%
Paper
-6.2%
-29.1%
Aluminium
-1.9%
-10.9%
-0.9%
-18.7%
Cardboard
-1.6%
PET – Plastic
-29.7%
HDPE – Plastic
+0.1%
Polystyrene
-1.5%
LDPE – Plastic PLA – Plastic Electricity
-0.2%
-9.8%
-74.8% -17.1% -18.7% -6.5%
-0.3%
-51.3%
Shipping; China – UK
+19.9%
-8.7%
Shipping; US – UK
-2.9%
Gas
Shipping; Brazil – UK
Shipping; Vietnam – UK Source: Mintec Analytics 09/01/23
-14.7%
-52.5%
-10.4%
-67.5%
+5.1%
-16.2%
-20.7%
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Key commodity updates Meat The final four weeks of the year saw an increase in the requirement for premium cuts of Beef, driven by the usual festive season demand. This surge typically leads to a shortage in availability during the early part of the New Year. As a result, there has been a +1% increase in the price of Beef over the last quarter, with some cuts experiencing as much as a 5% increase in the last month. Due to high domestic beef prices, consumers have been opting for cheaper protein alternatives. The new trade deal with Australia may increase availability, potentially alleviating price pressures. However, any exports from Australia or South America will still face challenges related to shipping and transport issues. The downward trend in Pork pricing, reported in October, has continued slowly. Steady price reductions have led to a 3.9% decrease in the cost of Pork over the last three months, with more than a -1% decrease in the last month alone. The focus on bacon products during Christmas has contributed to this trend, allowing producers to cater to festive demands.
-3.9%
Pork
vs. previous Year
This steady decline is due to the seasonal cycle of the market, with increased slaughter and processing during late autumn and early winter, followed by cold
storage as demand lowers outside of barbecue season. As the market prepares for the spring and summer barbecue season, pork pricing for the next quarter is expected to remain firm, competitive, and lower than the peak seen in 2023. In the Lamb market, summer saw continued decreases in pricing as availability improved, albeit at a higher price point than in previous years. Winter months, traditionally the most expensive for Lamb, currently sit at 7% more expensive this quarter than the last. The new trade deal with Australia and New Zealand is expected to supply the market with quality exported Lamb in the first quarter of 2024.
+1%
Lamb
vs. last month
All three protein markets (Beef, Pork, and Lamb) have been affected by recent increases in the core inputs to animal farms: Feed, Fuel, and Fertiliser. Global conflicts, weather changes in key growing areas, and disruption to shipping routes may lead to further short-term increases in these commodities. After a year marked by the HPAI virus affecting Chicken flocks, availability in the UK and EU has been tight, especially following a surge in demand over the holiday season. While the latest outbreaks are mainly in the Americas, concerns arise with Brazil accounting for a more significant percentage of imports into the EU.
However, the quantity of chickens processed within the EU is expected to rise by almost 2% versus 2023. Additionally, the tariff-free poultry trade was extended in Ukraine for another year, and it's expected that the EU market should see a consistent supply if conditions such as feed prices and HPAI exposure remain firm. One key trend is the increasing demand for chicken cuts beyond chicken breasts. Associated with cheaper pricing, the demand for chicken thighs, legs, and wings has increased in recent months, with some suppliers saying they are becoming increasingly more difficult to obtain. Regarding Eggs, the significant news at the end of 2023 was the rise in Salmonella cases in products imported from Poland, with over 200 reported cases in the UK. Producers in Sweden and Poland have taken steps to thoroughly clean producing and processing areas to address this issue. Apart from these bacterial concerns, egg prices increased in the latter part of 2023 but did not reach the highs observed in March and April during a supply shortage and heightened demand for Easter. Consequently, there is a 6.6% decrease in the price of eggs compared to last year. However, there has been a 0.4% increase in the previous month, likely attributed to increased news coverage.
Fish In December, negotiations concluded to establish fishing
Market Report | Quarter 1 2024
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place, it can make sense to look for alternatives to the main species of fish for your menus. Typically, a good flatfish such as Halibut is an excellent replacement for Haddock. For things like fish pies, you can use Pollock or Mackerel to keep the costs down without sacrificing quality or taste.
Dairy
quotas in the Northern and Norwegian seas, solidifying agreements for the UK and Norway to share catches and transfer stocks of various fish. The agreement aims to ensure a sustainable and profitable industry whilst maintaining the partnership between the UK and Norway. Whitefish markets, especially those for Cod, Haddock, and Pollock, have experienced significant volatility since the invasion of Ukraine. Despite recent sanctions, approximately 9% of fish consumed in the UK originates from Russian waters.
This pattern was evident again, with a 26% increase in a single month. The elevated price is expected to decrease throughout the first quarter of 2024. While concerns about the health of Norwegian fish farms have surfaced due to increased reports of parasites and diseases in 2023, they haven't had a lasting effect on the market supply. The UK ranks among the top 10 countries globally for imported Tuna, with a notable 100% increase in canned tuna sales reported over the past 5 years. Most of the UK's tuna is imported, making pricing reliant on shipping and fuel costs. Recently, prices of Skipjack Tuna from Asian waters have decreased monthly by -5%, resulting in prices over -21% down compared to last year.
This has contributed to a downward trend in the whitefish market, with Cod and Haddock prices decreasing. Haddock has seen a 15% decrease, and Cod a 13% decrease over the last month, supported by abundant catch rates at the year's end and reduced market demand during the festive period when Salmon is typically more popular.
-15%
On the topic of Salmon, there is usually a summer dip in pricing before a price uptick leading into the festive period.
The need for sustainability heavily impacts the fish market, and with catch rates in
Cod
vs. previous Year
In 2023, we saw a decline in the prices of Milk and its derivatives at the beginning of the year, followed by an upward trend in the latter half and this period included the lowest pricing for fresh Milk in the last three years, contributing to a robust Dairy market throughout 2023. However, there doesn't seem to be a repeat of last year's pattern where Milk dropped significantly over the Christmas period and then rose again in late winter. Instead, the price of Milk has been steadily increasing since November and is expected to continue until the Spring flush when more product hits the market. As a result, there has been a 2.6% increase over the last quarter. As anticipated, any changes in price or trends affecting raw Milk will also influence its byproducts. Butter experienced a steady decline throughout 2023 before surging in October, correlating with the increase in raw milk prices, and this trend has extended into the early part of 2024. With a 19% quarterly increase, the pricing of butter is expected to mirror that of Milk, with a slight delay for processing. So, a similar decrease in butter prices is anticipated when milk prices come down in the spring.
Market Report | Quarter 1 2024
For products like Butter and Cheese, the main challenge arises when there's a shortage of Milk, as reported in the EU over the last two months. This scarcity ripples up the food chain, making Milk needed for processing into cheeses less available and more expensive. Most of these dairy products will be waiting for the market to become more saturated with raw product in the spring. Until then, the monthly increase of 1.7% is likely to continue.
Fruit & Vegetables In 2023, Potato prices experienced their worst year on record, with increases beginning in March and persisting throughout the year, reaching a peak in September. There was a brief price dip as the harvest came in during October, offering a momentary respite. However, this relief was short-lived, as prices went back up in the lead-up to Christmas. Reports indicated a supply shortfall, raising concerns about empty shelves in the run-up to the festive season. Ultimately, these concerns largely failed to materialise. Due to these shifts, there is a substantial 33% increase compared to the previous quarter, and a striking 152% increase compared to last year. The primary driver behind these changes is the weather conditions we highlighted earlier, particularly the wetter autumn weather that impacted an already compromised planting season. The expectation of lower yields was compounded by the rising costs of fertilisers and energy in early 2023. Consequently, the UK now faces the challenge of having the lowest potato crop on record, raising concerns about the need to
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import potatoes next summer if domestic supply fails to meet demand. The other primary type of vegetable affected by the wetter-than-normal conditions is brassicas, commonly associated with Broccoli and Cauliflower. Recent yields have been notably poor, primarily due to the adverse weather conditions impacting farmers' ability to harvest. Consequently, there have been sustained price increases since the summer when demand typically rises. Broccoli reached its highest price point in 5 years, and Cauliflower is currently 36% more expensive than it was last month. Like with potatoes, there is growing concern that the UK may have to increase imports of these vegetables, inevitably leading to higher pricing in the market. Two regions significantly impacted by these weather changes are the Mediterranean and northern Africa. At the beginning of the year, drought and forest fires hit, causing substantial damage to the Olive crop, and adversely affecting the yields
for Strawberries, Tomatoes, and Peppers. As discussed earlier, these challenges have now extended to the winter crop of brassicas and have also affected the tomato harvest, which is approximately three weeks behind schedule due to delays in the planting season. Consequently, tomatoes have seen a notable increase of 97% compared to this time last year. While the adverse weather conditions can be partially mitigated by using greenhouses, the associated space and costs would further elevate the product's price.
Edible Oils Continuing in the same vein as the last 12 months, cooking oil prices remain stable and are now down to a level similar to those seen in 2021 before the war in Ukraine. A slight increase was recorded following the collapse of the Black Sea Grain Deal amid concerns that exports from Ukraine would be impacted. However, this impact failed to materialise – in cooking oil, at least - so the downward pressure on cooking oil prices resumed.
Market Report | Quarter 1 2024
As a result, the monthly decrease in Sunflower Oil and Rapeseed Oil stands at 2.1% and 4.1%, respectively, with no significant indication of a reversal in the next period. The success of harvesting and crushing operations in Ukraine has led to ample supplies, particularly rapeseed oil. However, stable demand for both oils has kept pricing robust, favouring the consumer. As a result, pricing parity has been established between these more affordable vegetable oils and palm oil, which experienced a decline in demand in the latter part of 2023, making it 14.7% cheaper than last year.
VEGETABLE OILS
-1% -16% RAPESEED
SUNFLOWER
Unfortunately, the same positive news does not extend to Olive Oil. The challenges faced by this year's Olive crop, including a heatwave and subsequent drought, severely impacted the harvest. These shortages continue due to the low yield, preventing an adequate quantity for processing into cooking oil. This year's significant drop in Olive Oil production stems from persistent droughts in Greece, Spain, and Italy, resulting in limited stocks available for the market. Recent export bans in Morocco and Turkey further exacerbated the situation, leading to quarterly increases of 10% in Olive Oil pricing from Spain and Greece, building upon prices that had already reached an all-time high in September. Fortunately, the pressure from pricing in other vegetable oils
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has ensured an ample supply of alternatives.
Dry Stores In 2023, Cereals and Grains, traditionally essential dry goods, have seen a turbulent two years marked by the aftermath of the war in Ukraine and disruptions to shipping routes. This instability has largely settled, and we now see consistently strong pricing for Wheat and Corn. The primary drivers for these prices are currently centred around their use as feed for farm stock. However, with farmers rearing fewer animals due to diminished margins and elevated costs, it’s anticipated the demand for feed will also experience a slight decrease. The past 12 months have been challenging for two of South America's largest crops. Firstly, the Sugar industry has faced a year where the overall yield and production quotas have reached their highest-ever values. However, even with Brazil generating its most extensive stock of sugar on record, it is anticipated that sugar prices will continue to rise into 2024, highlighting the ongoing struggle to meet market demand.
+11.7%
I n c reas e in th e p ric e o f S uga r ov er a y ea r
As Thailand and India both imposed bans on sugar exports in 2023, our dependence on sugar cane production in Brazil has grown. This restricted market availability has resulted in an 11% increase in prices compared to last year. Although there was a decrease
over the December period after the completion of Christmas buying, the anticipation of adverse weather conditions in South America at the beginning of 2024, along with delays in the Panama Canal due to low water levels and restricted throughput, suggests that exporting the Brazilian crop to the market will be delayed, potentially leading to a renewed increase in prices. In our last report, we highlighted the volatile nature of the current Coffee market, with prices trending low despite concerns over future stocks due to the amount of inventory in the market. Over the winter period, these stocks were depleted, and concerns about the upcoming crop were realised. As a result, there is expected to be another shortfall at the end of the next growing period. Prices have been on an upward trend in the last month of 2023, which is expected to persist in the first part of 2024. The upswing in prices will be fuelled by heightened demand and consumption and the constrained passage through the Panama Canal as well as a dry planting season. There is no indication that the upward trajectory in coffee prices will reverse in the first quarter. Robusta coffee is priced at 29% higher than the previous quarter, and Arabica is no exception, experiencing an 18% increase over the previous quarter. Shipping constraints holding up most of the available sugar and coffee exports from South America, coupled with export bans imposed by other major producers, could pose challenges for these two pivotal products at the outset of 2024.
Market Report | Quarter 1 2024
In the Press
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Market Report | Quarter 1 2024
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What’s In Season Apples, Beetroot, Brussel Sprouts, Cabbage, Carrots, Celeriac, Chestnuts, Dover Sole, Fennel, Leeks, Grouse, Lemons, Mushrooms, Mussels, Onions, Parsnips, Pears, Pheasant, Tangerines, Turnips, Venison.
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