Food price inflation looms as agri-food firms report hike in costs

Confidence rises but companies report difficulties related to costs, recruitment and Brexit

The acceleration in price growth is connected to the resumption of economic activity after lockdown, supply chain blockages, higher oil prices and Brexit. Photograph: Chris Ratcliffe/Bloomberg

The acceleration in price growth is connected to the resumption of economic activity after lockdown, supply chain blockages, higher oil prices and Brexit. Photograph: Chris Ratcliffe/Bloomberg

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Consumers in the Republic could be facing into a period of food price inflation with an increasing number of agri-food firms reporting a hike in costs, according to a report by accounting and professional services firm Ifac.

The group’s latest sentiment survey suggests that while confidence among agri-food businesses here has risen in recent months amid the lifting of restrictions, a significant number of firms are reporting difficulties to do with rising costs, recruitment and Brexit.

More than two-thirds (71 per cent) reported an increase in costs this year, from transport and energy to raw materials and packaging, “an issue – in some cases - that could contribute to food price inflation in the coming months,” the report warned.

Inflationary pressure in the Irish economy is now at its highest level in over a decade.

The acceleration in price growth is connected to the resumption of economic activity after lockdown, supply chain blockages, higher oil prices and Brexit.

The Central Statistics Office’s official consumer price index for August will be published on Thursday.

Some 64 per cent of agri-food businesses in the Republic said they had been negatively impacted by Brexit with one in every two citing transport disruption as a major impact, the Ifac survey found.

Fifty-five per cent of SMEs reported a change in consumer behaviour as the biggest long-term effect of the global pandemic.

Staff shortages

An overwhelming 97 per cent of businesses in the sector said they intended to maintain or grow employee numbers over the next year.

“However, conversely and supporting fears that food production may follow the construction, hospitality, retail and care sectors in terms of labour shortages, over two-thirds are finding it difficult to recruit the right people,” the report said.

This figure has increased since 2020 and is mostly affecting food SMEs, it added, while noting that a “lack of interest in roles” had become a key factor in recruitment difficulties for 2021, overtaking “skills not available” the previous year.

On the upside, the survey, conducted by market research group Amarach during June and July, found that optimism levels among food businesses here have seen a significant rebound, up from 55 per cent in 2020 to a four-year high of 77 per cent in 2021.

Challenges

The report also noted that with the agri-food industry facing significant challenges related to climate change, 37 per cent of SMEs are putting Environmental, Social and Governance (ESG) factors high on their agendas.

Some 87 per cent of respondents said they were taking positive climate change actions while all food and agribusiness SMEs are continuing to invest in climate change initiatives.

Responding to the report’s findings, Minister for Finance Paschal Donohoe said: “ESG is as commercially relevant today for Irish food and agribusiness SMEs as it is for large corporations and this is a very pertinent report for this entire sector that has played a key role throughout the global pandemic.”

Brexit

David Leydon, head of food and agri-business at Ifac said: “While it is encouraging that optimism levels have bounced back strongly, trends to watch out for are rising costs, recruitment challenges, negative impacts from Brexit, and lower than ideal R&D investment.”

“ A real missed opportunity is around the strategic planning process – it’s concerning that nearly 80 per cent of SMEs do not have a current strategic plan in place to guide their business,” he said. Minister for Agriculture Charlie McConalogue last week signed a statutory instrument incorporating more rigorous price reporting obligations into Irish law, which aim to improve food market price transparency in the EU.