2 Sisters warns food inflation could soar to 15% by mid-year

By Rod Addy

- Last updated on GMT

Kers: 'Consumers will suffer'
Kers: 'Consumers will suffer'

Related tags Supply chain Meat & Seafood Finance

2 Sisters Food Group CEO Ronald Kers has warned food inflation could rocket to 15% by mid-year and the UK will face hyper-inflation unseen for 50 years, compounded by the crisis in Ukraine.

Kers said input costs in chicken production had risen by 50% in past 12 months and claimed the ‘forgotten’ unfolding Ukrainian agricultural crisis could have massive repercussions for global commodity supply.

He urged cross-territorial collaboration to insulate states from geo-political crises in the future.

"The events in Ukraine are an unimaginable tragedy and our hearts go out to those affected and to our Ukrainian colleagues and supply chain partners and their friends and relatives back home," ​he said. "It is an incredibly worrying time and we will do all we can to support them.

'Major threat to food security'

"This conflict brings a major threat to food security in the UK and there is no doubt the outcome of this is that consumers will suffer as a result. War disrupts the free flow of trade and the impacts for us are severe. For example, the input costs of producing chicken – with feed being the biggest component – have rocketed. Prices from the farm gate have already risen by almost 50% in a year.

"Before this war began, 4-5% food inflation was being forecast by mid-2022. But we now could see a hyper-inflationary environment at closer to 10-15% - more than it's been for 50 years - if this conflict isn’t resolved quickly."

He said 2 Sisters Food Group was heavily dependent on a stable agricultural sector and could not isolate itself from overseas events, with commodities such as animal feed and CO​vitally needed. Countries that would be particularly vulnerable to the supply chain disruption are those that import more food than they produce.

There is some debate about whether or not the UK is a net importer of food. HSBC analyst David McCarthy and team has suggested the UK probably imports about 80% of the raw material​ for the food it consumes. However, based on the farmgate value of unprocessed food, the UK supplied 55% of the food it consumed in 2019, Government statistics suggest​.

'Global commodity price crisis'

"Our chicken doesn’t arrive on dinner tables without farmers. In fact, with no agriculture, there’s no business for us. Our concern is that a lot of people haven’t realised the food production clock is ticking. Ukrainian farmers should be sowing crops in March, instead they’re fighting for their country. If this war is not stopped now, the UK could experience a major drop in supply of products like wheat, barley, corn, rapeseed, and sunflower oil. So a European supply chain issue escalates to become a global commodity price crisis, and none of us can escape this.

"These pressures are piled on top of the acute inflationary environment we already have, and this is why we need cross-territorial collaboration food security strategies to bring some order amongst the chaos. The reality is companies like 2 Sisters trade globally, and the smooth flow of trade links between states are vital. Without measures to isolate states from food security risks, ultimately there will be less food and higher prices to pay, with the poorest in society hit hardest."

According to a Department for International Trade factsheet published on 18 February 2022​, UK export sales to Ukraine totalled £748m in the four quarters to the end of the third financial quarter of 2021. Ukraine imports were valued at £1bn over the same period.

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