Pelican Procurement Services Market Report Q3 2023

Market report

Quarter 3 2023

Included in this report:

o Cost of living update

o Weather conditions

o Key commodity updates

o What’s in season

Welcome to the Market Report

This report aims to provide you with information on what’s happening in the marketplace and the key factors affecting supply and product availability. We look at key commodity price trends, provide recommendations on ways to mitigate price increases, and provide insight into what produce is in season, guiding you to what’s best right now We hope you find this report helpful.

Market Conditions

Cost of Living

From September 2022, we have seen inflation reach 11.1%, then slowly and steadily decline to 8.7% before a sudden and unexpected drop to 7.9% during July. The recent focus on supermarkets and whether they were artificially raising prices has slowed overall inflation as increased scrutiny brought price reductions

When it comes to fuel and energy there is some good news at least. The energy price cap has been decreased from nearly £3,000 for a typical annual energy bill down to £2,074 for the same period, with further reductions expected in October that should take it below the £2,000 mark. Whilst the headline saving of nearly £1,000 won't impact everyone, the overall cost of Gas and Electricity is coming down, which will positively impact everyone, alleviating some of the cost stress that people have been suffering from.

Alex Gess Business Supply Chain Analyst Pelican Procurement

We’re here to help you. hello@pelicanprocurement.co.uk

The summer period is when most families look to get away. Still, with the increased cost of living and a reported rise in prices for holidays in the Mediterranean –Britain’s favourite holiday destination – there’s an expectation that UK-based holidays may increase in quantity this year, something that would be very beneficial to a hospitality industry that has felt the effects of first covid and then the costof-living crisis.

Climate Change

Thankfully, following this increased scrutiny, there have been some positive signs that food inflation is easing.

Sainsbury's bosses have reported that they are seeing the prices of goods coming down again but agree with Management at Tesco that we are unlikely to see prepandemic pricing return. Supermarket expectation is that by the end of this year, the current level of food inflation will halve from 17.4%. But this would first be seen with fresh food and later packaged and premade goods.

Another impact of the cost-ofliving crisis has been the increase in interest rates as the Bank of England has attempted to combat rising inflation. The current interest rate sits at 5%, and this increased rate will have the most significant impact on people’s repayments. Whether it be credit cards, loan repayments or renewing your mortgage rate, this new increased rate can have disastrous impacts on anyone struggling to cope with the increased fuel and food costs

7.9% 17.4%

We have been experiencing more unusual weather patterns in the UK and abroad, and these extremes are occurring more and more frequently. The UK experienced the hottest June on record, with highs of 33°C and averages of 15.8°C, which is a whole degree higher than the previous record.

Whilst we can all enjoy this improved weather in our own lives, it provides a problem to food growers and heavily impacts the wider UK economy. Firstly, crops are planned out ahead of time and planted according to growing seasons which are based on sunlight and rainfall. With both changing dramatically, it affects growth rates and final yields; it’s expected that disease pressure will remain high and

more destructive weeds will need maintaining, both linked to the changes in temperature and rainfall.

After a long period of struggle for farmers, with reduced processing and margins from Covid, to the massive increases in fertiliser costs, this is just the latest hurdle for growers as they report lower yields for winter potato and wheat crops which are now being harvested. This is expected to be repeated across many aspects of the UK farming industry.

south. States like Florida and Texas are seeing record temperatures that significantly affect residents and workers in those communities and ignite fires in California.

will influence surrounding markets and industries, the direct impact felt in the EU and UK will be minimal as we tend to export small quantities of goods from the region.

It's not just crops that are being affected; reports have emerged that fish and insect populations have suffered, with higher than usual fish deaths reported in rivers whilst plants and crops wilt in the increased heat, leaving less food available. Both groups of animals are essential in a healthy ecosystem, and the UK is under much stress right now.

Around the world, the story is very similar. India, China and Pakistan have seen destructive flooding causing havoc with crop growth and displacing people from their homes and communities. Fortunately, we mainly import clothing and machinery from these countries so our food supply chain should not be too heavily impacted.

In the West, the US and Canada have been experiencing heatwaves and, more notably, the Canadian Wildfires that have raged since March. That longevity makes this the worst year ever for North American fires, and the smoke and debris from these fires have impacted air quality and the climate across much of the US. The extreme heat that started these fires has now spread to the

With a third El Nino event predicted to be coming before the end of the year, there is no expectation that these current trends or weather patterns will change or reverse. The last El Nino event was in 2016, still the hottest year on record. With global temperatures already higher than they were back then, it's expected that right up until the end of the year, we will be experiencing more extreme weather, both in terms of heat but also flash flooding and unexpected rains. The first evidence of this is the heatwave that is spreading across southern Europe, bringing with it record temperatures as high as 43°C in Spain, which will severely affect any agriculture in the area, including pig farmers who have to be wary of slower weight gain and heatstroke both affecting herds.

The first significant commodity to notably suffer from this heat have been Olives and Olive Oil. With the majority of European crops coming from Spain and Greece, and both these countries seeing consistent 35°C - 45°C, not only are the trees and fruits suffering in the dry conditions, but pickers and processors are unable to work normal hours in the heat. There is further disruption expected to crops like corn or maize, grapes and citrus fruits

Global Markets

Global markets have been particularly volatile since our last report. Continued fighting in Ukraine was briefly overshadowed by a potential rebellion that led back to Moscow before fizzling out. Towards the end of June, we again saw fierce fighting in Israel and the West Bank. Whilst the conflict in Israel

The Russian rebellion and progress with the Ukraine counter-offensive have impacted EU and UK markets more Thankfully, we are not seeing increases in energy, which was the first impact of the initial war Still, the latest developments around the Black Sea Grain Agreement mean that we should expect wheat and sunflower oil prices to begin to creep up again This is because Russia has announced that the agreement is at an end, and they will look to attack any commercial vessels in the Black Sea region, making transporting goods once again challenging. Combined with the Olive Oil shortages mentioned previously, we can expect another increase in the pricing of cooking oil in general, although hopefully less impactful or surprising this time around.

+12%

Increase in the price of Sunflo wer Oil in 1 week

Up to this point and despite the active conflict, market stability has resulted in a reduction to fertiliser pricing and an improvement to grain availability, two things which directly and positively impact farmers, both livestock and produce It remains to be seen how much of an impact the latest developments will have, but the expectation is that if the component parts to fertiliser in particular are once again going to go up, then the end product also will, putting farmers in a repeat position of the 2021/22 season.

Key commodity tracking

Source: Mintec Analytics @21/07/23

Key commodity updates

Meat

The decline in food service demand for Beef continues as more and more people avoid eating out due to the increased costs involved and seek cheaper homemade alternatives. Even when eating out, people’s choices are still affected by the cost-of-living crisis, with many diners choosing lighter and cheaper options such as salads or fish.

Not only has Brazil become the fourth largest exporter of pork, outperforming last year, but countries like Hong Kong and the Philippines can capitalise on the high prices in Europe and supply the Chinese market. This positively impacts the European market; without it, the prices would be even higher as China purchases a huge quantity of Pork, which is currently being serviced by these extra markets.

of the virus and increased demand both from retail and domestic, as people seek out cheaper proteins to beef and pork.

Chicken last year +10%

Even domestic demand for beef cuts has seen decreases. Some cuts have seen a Yearon-Year volume reduction of up to -17%, and this has been based primarily on cost. Moving away from beef has meant that the recent pricing has trended downwards, as much as a -3% reduction, as retailers try to move stock.

Once again, we have to report that market prices for Pork are at an all-time high. Increasing another +3.5% since our last report and with the aforementioned heatwave across Spain, Europe’s primary supplier of pigs, it's believed that there will be little relief moving forward. The region is suffering from herd shortages, not just from the excessive heat, but also from a respiratory disease (PRRS) that is affecting birth rates and slaughter weights.

Some good news comes in the form of increased supply coming from other regions.

Like pig farms, sheep flocks have decreased in size over the last two years due to increased energy and feed costs. Whilst this has reduced the available supply, the UK can still meet domestic demand and supply meat to Europe. The increased prices from the EU mean that more of our Lamb and sheep meat is being exported to capitalise on those prices, but the sound supply levels have resulted in a slight decrease in pricing, with a reduction of 3.7% during the last month.

Pork vs. previous Year +16%

The strains of the HPAI virus (Avian Flu) ravaging European flocks of Chickens have begun to slow down in the summer months, a trend noted over the past two years Consequently, the supply shortfall we have been experiencing is expected to be somewhat relaxed. In recent months, we have seen a +4% increase in the prices of chicken across the EU, resulting in a yearly increase of +10.6% mainly stemming from the reduced supply as a result

Establishing a tariff-free poultry trade with Ukraine has greatly benefited both parties. Chicken exports from Ukraine have increased by +273% in the last year, which should help alleviate some of the increased demand. Some demand relief is now coming from South America.

Birds coming over from South America are bolstering this supply, where, thankfully, HPAI has yet to impact commercial flocks significantly Whilst the costs of transportation impact the final cost of poultry from this region, if the consistent supply can continue, we may see some relief in price towards the September period.

Thankfully, the most significant cost drivers for Eggs have now dissipated somewhat, firstly by moving through the Easter period and the seasonal buying associated with this holiday. Still, the order to have chickens reared in barns due to the HPAI virus has also been reversed. The spread of the virus has slowed, so chickens are back outside, and the flocks are also regenerating and producing more eggs. As a result, we are seeing some great decreases to the pricing of eggs; -18% over the last quarter and -7% in the last month alone. It is hoped that this trend will continue, and

we will see eggs return to their 2022 price.

Fish

As always, the markets for Haddock and Cod are particularly volatile, sometimes changing drastically from week to week. The main reasons for this volatility are things we have discussed before –predominantly supply vs demand, rising sea temperatures, and sanctions on Russian fish.

Recent trends have been downward, with catch rates throughout April and May reportedly very good, shoring up the current supply and resulting in a quarterly decrease of -79%. A secondary cost of whitefish – the fuel used to power the shipping boats, has decreased dramatically over the last year, and so we are seeing more fishing fleets completing catches and providing the market with a good supply. This should support falling prices over the summer period.

A large part of the European fish market is in the Mediterranean, but supplies there adequately cover the demand, which has dropped This is mainly due to the cost of living in many countries, including the UK. Still, the hotter weather and increased sea temperatures have also affected the quality of salted whitefish, which is particularly popular across Spain, Portugal and Italy.

The UK is in the top 10 countries in the world for imported Tuna This popularity has been shown in the reported 100% increase in canned tuna sales over the last five years. Almost all tuna we consume in the UK has been imported, so the pricing depends on shipping and fuel costs. Recently prices of Skipjack Tuna sourced in Asian waters have been increasing by +5% in the last quarter because, at this time of year, there is a ban on specific fishing devices, which sees the prices increase as supply begins to fall. It’s expected that this will last for the three months of the ban, but because of reduced shipping and fuel costs since this time last year, the costs and, thus, prices should look to decrease once again.

The market prices for Salmon have been unstable recently, with two all-time high prices being set in the last two years but has seen a -32% decrease in the last quarter. In May, when Salmon hit its secondhighest peak, it was expected this trend would continue, but household and retail demand for the premium fish has dropped off and with it so has the price.

-8.9%

The need for sustainability heavily impacts the fish market, and with catch rates in place, it can make sense to look for alternatives to the main fish species for your menus Typically, a good flatfish such as Halibut is a great replacement for Haddock, and for things like fish pies, you can use Pollock or Mackerel to keep the costs down without sacrificing quality or taste.

Dairy

After nearly a year of price decreases, including two large price drops, the Dairy market is beginning to creep up again The pricing of Milk primarily directs the market, and with a +48% increase in the last quarter alone, the rest of the dairy industry will adjust accordingly. The change in pricing is mainly due to volumes decreasing at this time of year, and are 2% lower than 12 months ago. This decline in volume is evident both in the UK and across Europe.

vs. previous Year

It is thought that this demand reduction is down to the costof-living crises and the perception that Salmon is a premium fish that isn’t bought in more austere times. As a menu replacement, Rainbow Trout can serve as a great alternative, saving on cost and can be touted as the sustainable and, in some cases, even locally sourced option.

Thankfully, because of the time it takes to process Milk into other Dairy goods, there is a slight delay to price changes to these subsidiary products as the more expensive raw material works through the market. For example, over the last quarter, we have seen Butter prices continue to drop despite the changes to Milk, and now they are -37% lower than last year.

Similarly, Cheddar Cheese has seen consistent decreases in pricing with a -3% reduction over the last quarter alone and signs that both of these trends will continue, at least in the immediate term. The increases in Milk are expected to filter on through the rest of the industry.

Cod

As such, it is a great time to introduce more cheeses or dairy items onto your menus. Cheese boards, as either a starting or ending option, are a great way to keep menus fresh and can be done by using locally or domestically sourced products to keep costs down even more. You can add some variation by including Goat cheese, which is in season.

Fruit & Vegetables

have seen increases of +8% and +5% respectively over the last month.

Much of this is a result of the weather conditions we have previously discussed, with the El Nino affecting Columbian crops, and European heatwaves affecting the yield of Citrus fruits and Tomatoes grown across the Mediterranean Harvesting and processing are set to begin at the end of July, but with the recent heatwave and current fires in the region, it is still being determined what the final yield will be.

pricing of Sunflower and Rapeseed Oils. In the last month alone, these goods have increased by +23% and +17%, respectively, and there is no indication this will reverse again until a solution has been implemented.

VEGETABLE OILS

The first and foremost thing to discuss is the huge increase in Potatoes. An 88% increase in the last quarter alone has resulted in some types of Potatoes, such as the Maris Piper, reaching their highest cost in a decade. These increases are fuelled mainly by the crop shortages in the UK, resulting from the dry conditions after the initial planting.

The prices should start to reduce somewhat as stock hits the market, but the main drop isn’t expected until the middle of August, so the market will remain elevated until then as the current demand has outstripped supply for most of the year.

Despite reduced energy costs, fruit growers across the UK and Europe are quoting input costs, such as energy and storage, as reasons for the increases in the prices of foods like Apples, Bananas, Peppers and Melons. Apples and Tomatoes, in particular,

The problem with many of these commodities is that they need to be in the growing season in the UK As a result, we must import them in, and while shipping costs have decreased from last year's highs, the price of transportation and fuel is higher than it has been, so the prices are stuck at higher levels than we may be used to

Edible Oils

The cooking Oil and Edible Oils market has seen much turbulence over the last 12-15 months. First, the war on Ukraine caused a huge and immediate spike which over time began to dissipate as stocks of other oils were used, resulting in the whole industry seeing a price increase across all types of Oil. After the Black Sea Grain deal was established, one of the main effects was a slow and consistent reduction in pricing until we saw prices at their lowest level since 2020.

Unfortunately, following Russia’s announcement that they were abandoning the Grain Deal and would attack ships in the region, there has been another surge in the

Added to this are the catastrophic weather in the Mediterranean and the impact of this heatwave on the potential crop for the region's Olive Oil production. As we have seen, parts of Spain and Greece are on fire, impacting not only the Olive tree orchards themselves, but also the amount of picking, packing and processing that workers can do as we see mass evacuations. The market has already reacted to this change in production, and the price of Olive Oil has increased by nearly +40% this quarter.

Dry Stores

Similarly to the cooking oils market, many dry goods have been directly impacted by the war in Ukraine. The most notable is Wheat. We had discussed before how the start of the war caused a huge price increase, but we could see something similar, albeit to a lesser degree, happen with the ending of the Grain Agreement.

The most immediate impact of the end of the Agreement can be seen in the +8% increase in the price of wheat entering the UK. This will affect anyone processing Wheat into items such as bread and pasta, two

foodstuffs which have become even more critical during the cost-of-living crises as they are low-cost, versatile goods. It’s not just European Wheat that is feeling the pinch either, with Canadian wheat increasing by +10% in the last month, a knock-on effect of the wildfires raging there since June.

Thankfully the market for Corn is more positive. Whilst Ukraine is also responsible for Corn exports, Europe is less reliant on it, so current demand is not ahead of supply by as much. As a result, we have seen monthly decreases in both the European and US markets of -2% and -9%, respectively. With raw materials forming an essential part of animal feeds, costs can be kept low by increasing the amount of Corn and reducing Wheat usage without affecting the herds.

The same weather that has resulted in an improved Coffee forecast has delayed the delivery of Brazilian crops. A potential drought impacting the Indian crop led to a reduction in exports, and thus the market has been increasing with a rise of +4% in the last month and no sign of this reversing

Fuels

Last year, the UK was heavily impacted by the Russian invasion of Ukraine, as they supplied a large proportion of the EU with its gas. Over the year, market forces have shifted with an increased reliance on green energy and the UK purchasing its Gas from alternative sources, reducing Gas and Electricity prices.

Reductions of -29% and -27% respectively mean that our energy bills will be reduced through the summer and autumn. The energy price cap, which is fixed until October, is at a much lower rate than that imposed until April.

basis of Petrol and Diesel pricing. With the availability of cheaper fuels, the costs of heating and lighting have reduced and the costs of shipping products from ports and factories to their destinations. The good stocks of natural gas left over from the winter period have been reassigned to nitrate fertiliser production, and this should go towards assisting farmers with crop yields as we move forward.

Packaging

Once again, we can report some positive news about Coffee The potential El Nino impact has increased prices over the last quarter. Still, with reported good stocks of Brazilian arabica beans, it's expected that pricing will remain stable - if not continue to trend downwards. We have seen a reduction of -9% over the last month, driven mainly by the end-of-season forecast volumes.

Unfortunately, the same cannot be reported on Sugar

There has also been a reduction in the cost of transport fuels. A combination of government policies to restrict the burgeoning prices of gas and warmer weather than expected throughout the initial winter period meant gas usage was down on the previous year, and current storage levels are higher than anticipated, meaning demand is being met by supply.

This is supported by a drop in crude oil pricing of -3% in the last quarter (per OPEC announcement), forming the

The major announcement for 2023 was that the UK government banned certain types of single-use plastics from 1st October this year. The new legislation focuses on removing single-use plastic cutlery, plates, bowls, trays and containers and introducing biodegradable alternatives.

Whilst this is undoubtedly good for the environment and a decision that should be praised, it’s also one that will increase the cost and difficulty, at least initially, to many foodfocused businesses. Procuring the new items will likely be more expensive than the current items due to the scales of production, so until stocks of biodegradable products are plentiful, this will likely add further cost.

In the Press

In Season

Aubergine, Beetroot, Blackberries, Broad Beans, Broccoli, Carrots, Chillies, Courgettes, Cucumber, Garlic, Halibut, Lettuce, Peas, Potatoes, Raspberries, Runner Beans, Lamb, Spring Onions, Strawberries, Summer Squash, Sweetheart Cabbage, Tomatoes, Trout, Turnips, Venison, Watercress