Food industry warns on availability as supply chain strained

The Federation of Bakers (FoB) wrote to George Eustice, secretary of state for environment, food and rural affairs, on 30 March warning of a pending bread shortage and serious threats to the viability of bakery businesses without Government support.

“There is no intention to scaremonger, but what the baking industry is facing over the next six months, with cost increases and uncertainty, has never been experienced in a generation, if indeed, ever before,” said FoB chief executive Gordon Polson in his letter to Eustice.

He warned raw material and energy shortages could lead to the prospect of bread being unavailable. If large plant bakers were forced to stop production, bread would disappear from supermarket shelves within less than 48 hours.

There was a strong possibility, Polson continued in his letter, that without mitigation or large finished product price increases, raw material cost increases could make bakery businesses unviable.

"Ingredient shortages could make bread supply unreliable," he stated. "Before the impact of the recent Ukraine crisis, cost increases added at least 4.5p to the cost of producing an 800g loaf of bread. This has not been recovered by the baking sector. Since then, the costs could have doubled.”

According to the FoB, while the UK does not rely on Russian or Ukrainian wheat, the loss of supply from these countries is having a huge impact on global supply. That could lead to wheat being diverted, for example from Russia to China, causing EU shortages. The EU may then decide to stop its exports, which are already muted, causing huge supply chain disruption for the UK.

“We estimate that even if the war stopped soon, the disruption to the planted Ukraine wheat, the lack of planting of spring wheat and the Russian sanctions, it would take an estimated three years before the harvest cycle returns to normal," Polson stated. "It is the case that all businesses will not be experiencing the same price increases and uncertainty at the same time, but once the northern hemisphere harvest is gathered, we can be sure of settled high prices across the industry.

“FOB members are working very hard with suppliers to do all we can to mitigate the well-publicised cost increases in energy and wheat, but it is inevitable that prices will have to rise," Polson continued. "Almost as equally concerning, is the challenge of uncertainty over the availability, not just the cost, but the supply of ingredients including wheat, diesel and packaging.”

Eggs

Meanwhile, on 31 March free range egg farmers called for major UK retailers to immediately increase the price of a dozen eggs in their shops by 40p to avert a catastrophe in the sector.  

As a result of raw material cost hikes, huge numbers of free range egg farmers were losing money on every egg laid by their hens, the British Free Range Egg Producers Association (BFREPA) claimed. Many were reporting they could last six months before they go bust, while others were already on the brink. 

The message has been backed up by the British Egg Industry Council (BEIC), which also called for an immediate price rise to save farms.

'Tidal wave of cost increases'

BEIC chairman Andrew Joret said: “The tidal wave of cost increases will see many family farms, some of which have been producing eggs for generations, going under in a matter of days, unless something is done quickly.

“The situation was unsustainable prior to the terrible war, but feed prices have accelerated dramatically in a way never before seen and farmers cannot absorb these costs and carry on with a viable business. Ten years ago, you might typically have paid £1.35 for six medium eggs, which today often cost less than £1 which is a third of the price of a barista coffee."

According to the BEIC the increase in uncontrollable input costs required to produce eggs, which is up by 30% on farms, shows no signs of slowing down. The availability of British eggs on supermarket shelves was seriously under threat if costs were not passed on, it warned.

'Not a single reply'

BFREPA chief executive Robert Gooch said: “For months we have been raising the desperate situation with all the major retailers, and they have all ignored the perilous position their farmer suppliers are in. We contacted Asda, Sainsbury’s, Morrisons, Tesco, Waitrose, Lidl, Aldi and Marks and Spencer. Not a single reply was received.

“This is not a false flag – the free range egg sector is in crisis and if something doesn’t change these farms will close and the people who run them will not have an income. This is a situation entirely out of farmers’ hands. The whole world can see that feed and energy prices have gone through the roof – that has consequences and we believe shoppers will understand the need for the egg price to increase on the shelves.”

Egg producer Dan Brown, said his feed costs were up 40%, his energy costs were rising by 60% and he was facing a cost-of-labour increase of 10%. As a result, he was losing about 2p-2.5p on every egg laid on the farm. 

Another producer - Tom Pope - said a feed price increase alone of £100/tonne added 20p to the cost of producing a dozen eggs. He said energy bills would triple on the current deal, leaving £40,000 to pay.

BFREPA is calling a crisis summit and inviting every major retailer and packer to attend to outline what they are doing to support farmers.

Fresh produce

Elsewhere, it has emerged that strikes in Spain are causing shortages of fruit and vegetables in UK supermarkets.

Clive Black, director and head of research at Shore Capital, issued a note stating: "Quite where UK food inflation peaks in current year 2022 - double digit is possible.

"If Putin is not to 'get his way, higher food prices are here for longer and with elevated forecourt and elevated home energy costs, the downward spiral on UK household discretionary expenditure is rising."

Black said he believed two thirds of UK households would experience a notable spending squeeze.

Alternatives to wheat feed for livestock in the form of soy offered little comfort, said Black, as droughts in Brazil - a core soybean supplier - looked set to push up global prices.

Dairy and oils

Following Arla UK managing director Ash Amirahmadi's warnings that UK milk supplies could be threatened, Black claimed dairy input costs could push up the cost of dairy products on shelf by more than 30%. And as sunflower oil availability has diminished, prices for finished products and processing have risen, having a knock-on effect on palm oil prices as manufacturers seek alternative supplies. This, in turn, would increase the price of products using food oils as an ingredient, added Black.

"We contend, without scaremongering, that food supplies will become something that needs greater consideration, as price rises are one thing, availability is another," he said.

"While we are not suggesting that the British will go hungry, the price and choice of foodstuffs could well be limited if further stresses and strains emerge in northern hemisphere farming systems in the near future."

Food Resilience Forum recalled

Eustice has announced the Food Resilience Industry Forum - chaired by Chris Tyas and set up two years ago in the midst of food shortages sparked by the pandemic - will start meeting again. And the Food and Drink Federation is pressing the Government on behalf of its members to allow last-minute unlabelled ingredient substitution in products where sudden shortages occur.

The Food Standards Agency has already flagged that such substitution is occurring in the case of sunflower oil without on-pack changes, with rapeseed oil being swapped in.

Meanwhile, a survey of British shoppers by MMR Research has indicated that a third of those aged 26-45 consider themselves very likely to visit food banks because they cannot afford their grocery bills. This group, also known as millennials, emerged as the most exposed to financial problems. However, the data also revealed that 45% of consumers would continue to buy what they wanted from supermarkets whatever the cost.

Andrew Wardlaw, chief ideas officer at MMR Research Worldwide, said: “Many people, particularly younger generations, are already actively thinking about visiting food banks and fretting about paying the bills.

"The trip to the supermarket will be more difficult for many, so brands will need to work extra hard to demonstrate value to consumers. Three-quarters of Britons in our survey do acknowledge that value for money is not just about price, though, so brands must continue to create distinctive user experiences that are simply too good to substitute with a cheaper alternative.”