Food price inflation less severe in short term but volatility remains

Agribusiness consultant European Food & Farming Partnerships (EFFP) has predicted that food price inflation is likely to be less severe than most experts believed in the short term. However, the EFFP suggested that things could change dramatically in the long term.

The message was given at the annual conference of the EFFP in London last week. Its report, prepared in conjunction with the Cranfield School of Management, said growers might have to completely change the way they do business.

The report was presented by Sion Roberts, senior partner of the EFFP. He said: 'We won't see a return to the double-digit food inflation which we had a few years ago. But we can expect a major readjustment of the market.'

He pointed out that food had become more affordable over the past 20 years. As a percentage of individual spending, it had dropped steadily. However, this is likely to change dramatically. "Something big is happening," he said.

Roberts pointed out that grain prices had quadrupled in the past three years and there is unlikely to be any fall. "Price rises are here to stay," he said.

He further suggested there would be increasing fears over food security and that suppliers would have to take out longer contracts to ensure they had the food they needed: "There is a real problem of volatility in the market. We will have to spend more time forecasting and managing risk."

Problems over sustainability are also likely, Roberts continued, and limits on the use of oil and water are likely to be imposed. In order to cope with these huge changes, the food industry would have to work together along the entire supply chain.

He suggested that collaborative working - with retailers closely linked to growers - could boost the value of the industry and increase stability. "To unlock value, there must be more mutual dependency," he said, and suggested that there must be a greater degree of trust in the food industry.

In conclusion, too many firms were thinking only of short-term gain, rather than making strategic decisions, said Roberts. The entire industry should be creating "innovative supply-chain arrangements that encourage greater investment at farm level," he said.

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