Severe weather taking toll on food output and prices

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According to economists at the Centre for Economics and Business Research (CEBR) domestic food production in the UK has been hit dramatically by the extreme weather conditions experienced up to this point in 2018.

As a consequence, food prices may well rise by an estimated £45m per week.

Wholesale prices for vegetables are already rising markedly. From March to July the farm gate price of onions increased by 41%, carrots by 80%, lettuce by 61%, wheat for bread by 20% and strawberries by 28%.

Dairy production had also suffered until recently, registering 11 consecutive weekly falls as the hot weather hampered grass growth. This has seen the farm gate price of butter rise by 24% since March. Even when grass growth returns to normal, the reduced grazing seen this year will have a lasting impact. Some farmers have had to turn to already depleted backup supplies to boost production, which will keep upward pressure on feed costs in the coming winter.

Much of UK’s grain – used to feed livestock, as well as for numerous food products – is imported from Europe, which has also seen record high temperatures this year. Reserves have kept prices from spiking drastically thus far, but industry forecasts and futures prices point toward coming increases. Wheat, which features heavily in European and British shopping baskets, is a concern. The wheat harvest is forecast to be down by 5% this year, and European wheat futures are currently trading around 30% higher than at the end of April.

With the wholesale price of many crops already rising very significantly and meat prices set to climb in coming months it seems likely that wholefood prices will rise at least 5%. Using Department for Environment, Food & Rural Affairs (DEFRA) research into the sensitivity of consumer prices to wholesale price shocks, CEBR estimates that the extreme weather will ultimately drive up the costs to UK consumers by £45 million per week. This is equivalent to a rise of £7.15 per month per household.

DEFRA research suggests that commodity price spikes can take 18 months to fully feed through into inflation.

So, while the worst of heat may have passed, the cost to consumers looks set to climb.

NFU president Minette Batters indicated that forage levels for feeding livestock are at record low levels with dairy farmers now relying on silage meant for winter use.

She added that many farmers are looking at £60,000 of added costs. The NFU supremo wants the government to take immediate action on these matters.