Sugar prices plummet as inflation in fruit soars

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Bitter-sweet news: the hot weather is hindering growth of fruit but sugar prices have fallen

Fruit prices inflation rose significantly in June following high demand and adverse weather, according to new research.

The latest edition of the CGA Prestige Foodservice Price Index also found that over supply of sugar has pushed prices down to a new low.

Fruit prices were up 5.2% month on month compared to May, with dry weather hindering growth in many 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 parts of Europe, threatening many fruit farms and damaging yields.

Adverse weather conditions

Meanwhile, sugar-related products have recorded an 8.4% month-on-month fall in prices. Sugar crops have also been hit by recent adverse growing conditions in Europe, Brazil and Australia, but such 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 (head of the European Commission) heading to Washington DC to try and dissuade the US from continuing with their tariffs while President Trump threatens the European auto industry and Chinese imports.

Longer-term impact

Prestige Purchasing chief executive Shaun Allen said: “While inflation in the foodservice sector has eased back for the first time since February, the recent hot weather across the UK and 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 charges in the US add further pressure and uncertainty into what is already a volatile market.”

The new index highlighted the intense volatility in foodservice prices at the moment, according to CGA client director for food Fiona Speakman.

She added: “The summer heatwaves have not been good news for the supply of many key items, plus tariff wars and Brexit are starting to cast shadows over future imports. We will need to watch macro and micro inflationary trends very closely in the months ahead.”