Sugar prices plummet to new low as inflation in fruit hits high

New edition of the CGA Prestige Foodservice Price Index reveals that Inflation eased in June following steady rises in recent months.
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Fruit price inflation rose significantly in June following high demand and adverse weather, the latest edition of the CGA Prestige Foodservice Price Index shows—but over-supply of sugar has pushed prices down to a new low.

Fruit prices were up 5.2% month-on-month against May, with dry weather hindering growth in many key areas. The UK continues to suffer from migrant labour troubles, as the intense heat caused fruits to ripen quickly at a time when pickers are in short supply, meaning many crops were left to rot in fields. Much of Europe has suffered from similar issues, preventing imports from providing any price relief. Fires have also hit much of Europe, threatening many fruit farms and damaging yields.

Sugar-related products have meanwhile recorded an 8.4% month-on-month drop in prices. Sugar crops have also been hit by recent adverse growing conditions in Europe, Brazil and Australia, but any impacts have been offset by bumper crops in India. Sugar-producing countries are now being pressured by the Global Sugar Alliance to remove subsidies, particularly from India and Pakistan, the main drivers for the overproduction.

Turbulence in the foodservice sector is being exacerbated by trade wars, which have escalated after the introduction of retaliatory tariffs between the US, China and the EU. Some commodity prices such as US soybeans have collapsed following Chinese tariffs on the crop, and are unlikely to be the only casualty. It is also unclear whether the situation is worsening or heading towards an acceptable agreement, with Jean-Claude Juncker heading to Washington to try and dissuade the US from continuing with their tariffs while President Trump threatens not only the European auto industry but all Chinese imports. 

Shaun Allen, Chief Executive at Prestige Purchasing, said: “While inflation in the foodservice sector has eased back for the first time since February, the recent hot weather, not just in the UK but across Europe, looks set to affect a number of food products, particularly produce and crops, which could potentially lead to a longer-term impact on meats due to feed shortages. The tariff changes in the US add further pressure and uncertainty into what is already a volatile market.”

Fiona Speakman, CGA Client Director – Food, said: “Our new Index highlights the intense volatility in foodservice prices at the moment. The summer heatwaves have not been good news for the supply of many key items, and tariff wars and Brexit are starting to cast shadows over future imports. We will need to watch both macro and micro inflationary trends very closely in the months ahead.”

The CGA Prestige Foodservice Price Index is jointly produced by Prestige Purchasing and CGA, using data drawn from over 50% of the foodservice market and around 7.8m transactions per month. Both headline and full category reports are now available as a subscription service:

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