Market Report - August 2012

MARKET REPORT up to August 2012

GENERAL

Overall shop price inflation in the UK slowed to 1.1% in June 2012 from 1.5% in the previous month marking the lowest since 2009, according to the British Retail Consortium - Nielsen Shop Price Index.

Food inflation declined to 3.5% from 4.3% in May, while deflation in non-food increased by 0.3% from 0.1% in May.

EXCHANGE RATES

  • Against the $, sterling opened the month at 1.55 and is at 1.552 as of 11th July.
  • Against the , sterling opened the month at 1.25 and ended at 1.265 as of 11th July.

CRUDE OIL and FUEL

The fall in crude oil prices seen since March stopped towards the end of June, following the news that European leaders agreed on joint policies to help Spain and Italy cope with the Eurozone crisis. Prices rose by 3% for both Brent crude, on ICE London, and light sweet crude on NYMEX. Fuel prices were mixed. Petrol prices fell in the EU by 1%, while diesel prices were up 2%.

FATS AND OIL

Soya bean oil ended up 3% in Rotterdam as prices were supported by depleted soya bean supplies resulting from poor harvests in key exporting countries in 2011/12. Global soya bean stocks at the start of 2012/13 are estimated to be down 24% on the year before, a four-year low. Also in Rotterdam, sunflower oil and rapeseed oil were little changed over the month as a whole. Global rapeseed production in 2012/13 is forecast to remain largely steady compared to 2011/12 at 60.4m tonnes with declines in the EU expected to be offset by increases in Canada. Palm oil declined in Rotterdam by 2% although there has been an upward surge in early July on the back of soya oil concerns.

WHEAT

Wheat production forecasts for 2012/13 were revised down in June as crop production prospects in several exporting countries deteriorated. Milling wheat futures rose sharply on CBOT by 12% and LIFFE Paris by 10%. Feed wheat prices were also up by 10% on LIFFE London.

DAIRY

Sentiment in the EU dairy market has started to change with increases seen in EU butter prices, up by 6% on average with the largest rises seen in the UK by 14%.
EU dairy powders were all generally up on last month, SMP prices ended up 7% on average in the EU, as exports were up 21% for the first 4 months of 2012 compared to 2011. WMP saw its largest increase in Germany at +14% as strong export demand and a weak EUR helped producers to be more competitive internationally. Whey powder rose by 9% on average in the EU. UK liquid milk prices fell 5% as the peak of the milk supply was met with low demand. EU eggs were down 3% on average, UK wholesale prices also fell by 4%.

DRIED FRUIT

Sultana prices have increased during June with a tightening of supply. The new crop is expected to be good although the likely hood of an increased switch into Raisins is expected, which may keep the pressure on prices.
Greek currants are all but sold out for current crop and although the new crop is expected to be better, the lack of carryover is likely to keep prices at similar levels.

COCOA

Cocoa beans were up on both LIFFE and ICE by 7%. In Ghana, the World's number two producer, production in 2011/12 is forecast to decline 13% year-on-year to 890,000 tonnes as the country has been experiencing dry weather conditions which have been detrimental to pod development. Cocoa butter also rose by 7% in the UK while cocoa powder remained unchanged.

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