Food inflation has peaked and is set to fall from over 12 per cent to around three per cent by mid-2009, according to a new retail food price forecast from English Farming & Food Partnerships (EFFP).
Speaking at the body’s annual conference on Tuesday, EFFP chief executive Siôn Roberts warned that high and volatile food prices are here to stay, both globally and in the UK, throwing up numerous challenges for the farming industry. “The era when the global supply of food kept pace with demand has ended,” said Roberts. “What is clear is that the UK looks set for a painful recession which will impact significantly on consumer demand over the next 12 months. But market fundamentals still point to a doubling in the global demand for food by 2050.
“The net result will be that the balance between supply and demand of food is set to stay tight over the longer term, which will create a continuation of a challenging business climate for both farmers and food companies.”
In April, EFFP set up a strategy unit in conjunction with Cranfield School of Management and a group of leading food companies to build a model capable of forecasting retail food inflation looking two years forward. “We believe that we are the first people in the UK to publish such a forecast,” said Roberts.
The details for the forecast will feature in a new quarterly publication called VIEW, published for the first time this week, which aims to provide business leaders with clarity on some of the key issues influencing the food industry.
A new emphasis on stronger relationships and managing risk in the supply chain will be critical in the future, Roberts told some 300 delegates. “Such relationships will take on a new dimension for food processors and manufacturers; namely, security of supply,” he said. “The advantage that has shifted to farm businesses in the last year is not that of an increase in the price of agricultural commodities, but rather the realisation by downstream customers that there is additional value to be gained by forming long-term, strategic relationships with raw material suppliers.
“Significant value is going to be unlocked at the interface between agriculture and the food industry, and to unlock it both farm businesses and their food chain customers will have to think more strategically about their relationships and be prepared to embrace change. Everybody in the supply chain needs to be playing on the same team.”
EFFP chairman Steve Ellwood urged delegates to engage with EFFP as a partner to help deliver the solutions needed to meet today’s challenges. “I truly believe that there is a real opportunity to change the inherent relationship between agriculture and the food industry to the benefit of all,” he added.
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