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Ulster Fry Index reflects inflation crisis with worst to come

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Mark Crimmins, regional managing director, Ulster Bank NI; Rhonda Geary, operations director, RUAS; Cormac McKervey, senior agricultural manager, Ulster Bank; and Richard Ramsey, chief economist, Ulster Bank NI.

Mark Crimmins, regional managing director, Ulster Bank NI; Rhonda Geary, operations director, RUAS; Cormac McKervey, senior agricultural manager, Ulster Bank; and Richard Ramsey, chief economist, Ulster Bank NI.

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Northern Ireland households are facing their biggest fall in disposable income since the 1950s, with food, fuel, and energy prices set to continue rising, was the forecast at Ulster Bank’s annual agri-food briefing.

Held ahead of the Balmoral Show, the Belfast event included the launch of the Bank’s Ulster Fry Index 2022, indicating an overall year-on-year price hike of 6.4% for a cooked breakfast*.

Cost increases for individual components of the Index, the Bank’s benchmark for food inflation, ranged from 1% for bacon to 16.7% for milk.

Three years ago, the Index was sitting at only 0.9%, said Ulster Bank Chief Economist Northern Ireland Richard Ramsey, but it’s now at its highest level since 2014 and has risen by 29% since the 2008 recession.

Positives include the recovery of food and drink sector output to pre-pandemic levels, while trade between Northern Ireland and the Republic of Ireland has been boosted after Brexit.

However, with the cost-of-living crisis and skills shortage in the sector now exacerbated by further global supply chain issues after Russia invaded Ukraine, the squeeze on household budgets will only get worse, said Ramsay.

The tax burden will be at its highest since the 1940s, inflation is forecast to hit 9% and the Ulster Fry Index is expected to experience double-digit inflation over the next 12 months.

“The fact that we are now in a new cost-of-living crisis means that creating understanding of price rises and cost pressures and where they are coming from is essential,” he said.

“What the Ulster Fry Index is telling us is that the prices of everyday items like milk and bread are rising really strongly at a time whenever households are also having to contend with big rises in their household energy bills.”

Ramsay said stockpiling at the start of the pandemic had proved unnecessary, with the grocery supply chain working hard to keep shelves stocked.

“Today, two years on, though, a new and worrying food crisis is on the cards for different reasons,” he said. “Russia and Ukraine are two of the most important producers and exporters of agricultural commodities in the world.

“Overall, the two countries export one in eight of all calories traded worldwide. What Saudi Arabia is to oil, Ukraine and Russia are to cereal crops. And don’t forget that cereal crops aren’t just a direct source of food, they are also a major indirect source of food in that they are fed to the livestock that we then consume.

“Food supply problems will further fuel economic nationalism due to the scramble for food security, meaning the further unwinding of globalisation, or de-globalisation. Indeed, such is the concern about the supply of food that countries are now hoarding and stockpiling by banning exports.”

Offering a farming perspective at the agri-food briefing was Ulster Bank Senior Agriculture Manager Cormac McKervey.

While input costs are rising at an alarming pace and farmgate prices are high, margins remain static or lower than last year, making cashflow the single biggest issue for the sector, said McKervey.

Beef and lamb returns have been strong and poultry less exposed to market pressures, but the situation for the pig sector has been “brutal”, he said. “Pig farmers are facing the most significant impact with input costs rocketing and the price for pork falling throughout the year.”

Milk pricing has been high, reaching 40p/litre, but with little improvement on margin.

McKervey said the green agenda has now become a standard component of every finance agreement, a message reinforced by Ulster Bank Head of Northern Ireland Mark Crimmins.

“The agri-food sector is a key pillar of the Northern Ireland economy, and we remain strongly committed to supporting it through the many challenges it currently faces,” said Crimmins.

“In particular, we want to work in partnership with the sector to tackle climate change and provide the tools and expertise agri-businesses need to fulfil their green ambitions.

“As a leading financier of renewable energy projects, we have recently launched two new green propositions including green loans and green asset finance options for qualifying SMEs.

“All of our business managers now undergo specialist climate training and are now fully equipped to assist customers, including those in the agri-sector, on their sustainability journey.”

*Prices taken from the ONS Retail Price Index for the year to the end of February 2022


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