Fund Insight ODDO BHF AM Future of food
Story of the month
Putting together a salad in the UK has rarely been so difficult. After a dramatic peak in egg prices, which we discussed in last month’s Fund Insight, British shoppers are now facing a worsening shortage of various produce. Tomatoes, cucumbers and peppers have now been rationed for several weeks, with shoppers limited to a maximum of 3 of any kind as a way to manage the shortage.
The ongoing British “vegetable fiasco”, in the words of one European broadcaster, is the result of several unfortunate synergies.
First, Britain depends on imports for much of these types of produce, putting supply in danger when, as it did this winter, climate change-induced weather patterns damage production. For instance, at this time of year, Britain imports around 95% of all tomatoes it consumes, with more than 25% coming from Morocco, and 20% from Spain. Morocco has seen unusually cold temperatures, rainfall and even snow in the past weeks. Aiming to stabilize domestic tomato prices, Morocco cut its exports, leading to a disproportionate impact on Britain’s food supply. In this sense, the UK’s dependence on a small number of external actors for production has increased the vulnerability of its produce supply. Similarly, an extended cold snap in Spain has disrupted lettuce, cabbage and persimmon production, driving up prices and lowering export volumes to the UK.
Second, British growers, facing disproportionately high energy costs, have been reluctant to balance out the fall of supply by growing produce in greenhouses, a notoriously energy-intensive process. This is telling of the severity of the cost-of-living crisis Britons are currently facing. Evenwith food inflation at 17.5% as of March 19, its highest level since 1977, and with farmers standing to make outsized profits, high energy costs continue to make mass production in greenhouses unviable. As things stand, UK food inflation has meant that the average household now faces an additional annual £ 837 spent on groceries if they do not cut costs.
Third, the trade disruptions caused by Brexit may have aggravated the situation by making Britain a comparatively unattractive trade partner. Indeed, and with limited supply, exporters must make choices, and Britain’s Brexit-induced requirements of customs declarations and pre-notifications for produce imports mean that deliveries are often held up for inspections. Some reports suggest that a truck bringing Spanish tomatoes into the UK spends, on average, 77 hours in inspection queues, to the point that many lorry drivers refuse to deliver to the UK. We can’t say we blame them.
The situation is unlikely to improve in the near future, and may worsen as shortages spread to UK-grown produce. Cauliflower, leek and carrot production is likely to suffer from recent weather with the month of February being the driest on record since 1993. In these conditions, Jack Ward, CEO of the British Growers Association, warned that “there’s a limit to how long growers can carry on producing stuff at a loss”.
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ODDO BHF AM Fund Insight Future of food
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