More food shortages could add to Britain's price pressure

[March 28, 2023]  By James Davey

LONDON (Reuters) - Britons already reeling from the biggest rise in food prices since 1977 may have to get used to shortages of fresh vegetables as soaring costs and unpredictable weather hit domestic production.

British shoppers have faced a shortage of tomatoes, cucumbers and peppers in recent weeks after disrupted harvests in north Africa reduced supply, while inflation forced industry buyers to spend more on less from key markets such as Spain.

Tax office data showed Britain imported 266,273 tonnes of vegetables in January 2023 - the smallest amount for any January since 2010, when the population was around 7% smaller than it is now.

Compounding matters, UK production of salad ingredients is expected to hit a record low this year as costly energy deters British producers from planting crops in greenhouses.

The tight conditions have helped to push British food price inflation to levels not seen for almost 50 years.

Industry data from market researcher Kantar on Tuesday showed UK grocery price inflation hit a record 17.5% in the four weeks to March 19, underscoring the problem for policymakers.

Many UK food retailers are buying less, knowing their customers cannot afford to spend so much, taking a hit to their profits in the process.

Jack Ward, CEO of the British Growers Association, said there was now a question mark over the future of Britain's fresh food producers.

"There's a limit to how long growers can carry on producing stuff at a loss," he said.

Growers, farming unions and shop owners warn of more shortages ahead, possibly soon spreading to other home grown crops, including leeks, cauliflowers and carrots because of summer drought and winter frosts.

In March, the UK typically imports about 95% of its tomatoes, but that drops to 40% in June through to September.

The warnings come after supermarkets were forced to ration egg sales late last year, while the cost squeeze extends to poultry and pig farmers, prompting many to quit the industry.

Apple and pear growers have also said not enough trees are being planted to maintain orchards.
 

While the government and supermarkets say they are confident about supply, the salad crisis has shone a light on the precarious state of Britain's fresh produce industry.

Lee Stiles, secretary of the Lea Valley Growers Association, whose members produce about three-quarters of Britain's cucumber and sweet pepper crop, said by March about half still had not planted, while 10% of the membership ceased trading last year.

Empty shelves of vegetables are seen in Morrisons, Newcastle-under-Lyme, Staffordshire, Britain, February 27, 2023. REUTERS/Carl Recine

'EMPTY SHELVES'

"There are real risks that empty shelves may become more commonplace," Minette Batters, president of the National Farmers Union, said.

The union, which expects 2023 UK production of salad ingredients to hit its lowest level since records began in 1985, had warned for months about the danger of excluding horticulture from a government scheme that provides help to companies struggling with energy costs.

Ward said margins in fresh produce were traditionally around 1-2%, but this year they have turned negative due to high energy, fuel and labour costs.

For many retailers, the ability to avoid shortages will depend on how they fare in sourcing produce overseas.

That can be complicated by UK supermarkets' practice of setting prices for the whole season, while their European Union rivals are more flexible, one grower, who also imports and packs goods, told Reuters.

Britain's departure from the bloc has also played a part, with increased paperwork discouraging drivers from making the trip to the UK, which could also explain why supermarket shelves in continental Europe remain generally well stocked.

Andrew Opie, director of food and sustainability at the British Retail Consortium, which represents the major food retailers, said supermarkets were confident about the resilience of food supply chains, particularly with the approaching UK growing season.

But smaller retailers are under pressure.

Engin Ozcelik, a former industry buyer who now runs a food store in North London and acts as a consultant to others, said they were buying less produce after tomatoes on the vine went from a typical price of 7 pounds ($8.59) a box to 25 pounds a box.

He said shoppers who once reined-in spending in the final week before payday were now cutting back by the middle of the month.

The grower who spoke to Reuters, and who asked not to be named, said there was too much focus on food inflation and not enough on the strength of the whole system.

"But if we've got no product on the shelf then inflation doesn't matter. We've got to learn from that."

($1 = 0.8150 pounds)

(Reporting by James Davey, additional reporting by Andy Bruce and Sarah Young; editing by Kate Holton and Tomasz Janowski)

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