30 April 2008 - UK media report that coffee, cocoa, rice and milk prices are all expected to continue on their upward trend over the next ten years as factors such as rising oil and fertiliser prices, water shortages, changing dietary habits in the developing world, growing use of crops for biofuel production and climate change all combine to push food prices ever higher.
Coffee and cocoa prices are projected to increase dramatically over the next ten years. As people in developing countries such as China and India are getting richer, so is demand for the commodities expected to rise. Rice prices are also forecast to increase due to shortages in major rice-producing countries.
The price of milk in the UK has increased by £0.20 per pint ($0.70 per litre) in the past 12 months, due mainly to rising feed prices. For years British retailers have kept prices down, thus forcing dairy farmers out of the industry, creating a shortage and pushing prices yet higher.
It isn’t all gloom and doom though, as some products should remain sheltered from what has been widely dubbed “a perfect storm”.
As it is tax that affects the price of wine in the UK, rather than the cost of raw ingredients, bottling or transportation, wine is not expected to be impacted by the crisis.
Ready meals too should avoid the worst of the food crisis, as raw material prices makes up only a fraction of the cost of the finished product, with packaging, marketing and transportation accounting for the rest. If raw material prices go up, food manufacturers can therefore try to absorb the increases by cutting production costs elsewhere in the production chain.
Similarly, wheat accounts for only 13% of the price of a loaf of bread. Other ingredients, but also packaging, advertising and transportation make up the rest of the price. Retailers are expected to try to absorb rising commodity costs in order to keep the price of the staple down.
Sales of fruits and vegetables in the UK have been climbing over the past few years and the trend is expected to continue as interest in healthy eating grows, and prices remain stable. In the long term though, those too are expected to climb due to rising oil and fertilizer prices. It is expected that people will eventually have to switch to locally grown produce as rising oil prices make it financially unviable to ship fruits and vegetables across the world.