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March 9, 2021updated 28 Jul 2021 12:54pm

Commodity-driven food inflation to persist in 2021 – Rabobank

Food inflation could be here to stay amid rising commodity and shipping costs related to the pandemic and global weather patterns.

By Simon Harvey

Food inflation could be here to stay amid rising commodity and shipping costs related to the pandemic and global weather patterns.

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  • What impact is inflation having on UK retail sales?
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  • Which industry sectors are most vulnerable to reduced consumer demand?
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  • How long will high inflation last in the UK?
  • How can your company survive and thrive in a high inflation environment?
Enter your details here to receive your free whitepaper and ready your business for these increasingly uncertain times.
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That’s the outlook painted by Rabobank, the Netherlands-based financial services and banking firm, as the S&P GS Ag Index of raw materials rose to its highest level since 2014, having climbed almost 50% since the middle of last year.

Rabobank pointed to four factors driving the gains and which are likely to remain through 2021: weakness in the US dollar; the possible extension of the La Niña annual climate pattern into the US spring planting season; global demand for commodities; and speculative trading as a hedge against inflation.

Penned by Rabobank analysts Carlos Mera and Andrew Rawling, the report noted: “Although the speculative appetite for agri-commodities may seem exaggerated, it is hard to see it going down too much. Low interest rates, potential further fiscal stimulus packages, good global demand (not so much for the plate but for storage and animal feed), and potential adverse weather are likely to sustain high prices in agri-commodities through 2021.”

It said global demand for some commodities such as sugar, cocoa, cotton and coffee “has been outstanding”. And poor weather conditions in Russia could impact wheat crops, while in Brazil and Argentina prevailing dry weather conditions could push up prices of raw materials such as soybeans, corn, cotton, sugarcane and coffee. 

The cost of shipping has also been rising during the pandemic amid difficulties accessing ports, which has led to a shortage of containers as customs delays increase the time getting from source to destination and back again, while increased exports out of China are adding to the difficulties. 

“There has been an astronomical increase in container shipping costs, particularly from south-east Asia, with prices more than doubling since November, as Chinese exports are running high,” the analysts wrote.

“Containers are particularly important for coffee, white sugar, dairy, meat, and packaged products. Given further potential disruptions, storing a little bit more near factories and at destination seems like the rational decision, and this is likely for at least 1H 2021.” 

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Free Whitepaper
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What is the impact of historically high inflation on the UK consumer landscape?

The average UK consumer is experiencing a severe cost-of living crisis as inflation surges to a forty-year high and the price of goods continues to rise. This shock is the result of the sharply increasing costs of commodities, energy, and the ongoing conflict in Ukraine, and is threatening FMCG manufacturers, retailers, and foodservice operators’ ability to survive and grow. Inflation will have a profound effect on many consumer-facing industries in 2022 and beyond. Consult GlobalData’s new whitepaper, Inflation in the UK: The Impact of Historically High Inflation on the UK Consumer Landscape, to better understand shifts in consumer behavior and their impact on spending patterns, as well as the implications for UK businesses. This whitepaper covers:  
  • Why has global inflation returned with a vengeance?
  • What is the current inflation situation in the UK?
  • What impact is inflation having on UK retail sales?
  • What tactics are businesses relying on to tackle the effects of high inflation?
  • How are consumers changing their behaviors to cope with the higher cost of living?
  • Which industry sectors are most vulnerable to reduced consumer demand?
  • How is the government responding to high inflation?
  • How long will high inflation last in the UK?
  • How can your company survive and thrive in a high inflation environment?
Enter your details here to receive your free whitepaper and ready your business for these increasingly uncertain times.
by GD50 Custom
Enter your details here to receive your free Whitepaper.

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