With rising energy costs impacting businesses, the Northern Ireland Food and Drink Association has highlighted that, while firms have tried to absorb as much inflation as possible, consumers could see higher prices for food and reduced ranges.

Michael Bell, Executive Director, Northern Ireland Food and Drink Association (NIFDA) said: “The war in Ukraine has had a ripple effect on the food system globally, as costs for fuel, feed and fertiliser continue to rise. NIFDA members have been striving to keep a lid on prices, trying to absorb as much of this inflation as possible, but, with costs continuing to rise across the food supply chain, there is a real possibility of price increases and reduced availability of certain ranges.

“Energy costs are severely impacting our NIFDA members now and immediate assistance is needed to help food manufacturers through the winter. It is vital that the government has plans in place to ensure disruption is minimised for food manufacturers, and to support companies with spiralling energy costs. If action is not taken urgently, there will be serious concerns about the sustainability and viability of businesses here.

“Given the fact that the majority of food produced in Northern Ireland is consumed in Great Britain, this is something which requires national attention. It is vital that our industry remains equipped to keep feeding the nation. The government needs a strong focus on food to see how the industry can be supported and keep prices under control ahead of a difficult winter.

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Food prices soared to a record high in March after Russia invaded Ukraine, fuelling fears that the conflict would spark hunger in countries relying on their exports.

While prices remain high, they have now dropped for a fifth month in a row, falling by 8.6% in July compared to June, according to the Food and Agriculture Organization’s food price index.

The index, which measures the monthly change in international prices of a basket of food commodities, was still 13.1% higher than in July 2021.

The biggest drop was for vegetable oil prices, which fell by 19.2% between June and July to hit a 10-month low.

The cereal price index logged a monthly drop of 11.5%, the FAO said.

The decline for cereals was led by a fall in world wheat prices, “partly in reaction to the agreement reached between Ukraine and the Russian Federation to unblock Ukraine’s main Black Sea ports”, the UN agency said.

Shipments under last month’s UN-brokered deal began last week, with a first vessel carrying corn leaving Ukraine for Lebanon on Monday.

“The decline in food commodity prices from very high levels is welcome, especially when seen from a food access viewpoint,” FAO chief economist Maximo Torero said in a statement.

However, he said many uncertainties remain, pointing to high fertiliser prices, a bleak global economic outlook and currency movements.

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The rises have left dairy farmers unable to cover their expenses and that the extra expenditure needs to be alleviated by those further up the supply chain to prevent putting milk supply at risk, the farming union says.

UFU dairy chair Mervyn Gordon says: “Retailers, as well as processors, need to be supporting farmers so they can receive a fair return from the booming dairy market which will help significantly in managing the extra expense they’re currently enduring.

“As reported by Arla, the price of liquid milk in shops (up to 2022) is seven percent lower than what it was ten years ago, despite the thriving dairy market. If the price of milk and all dairy products in stores does not rise correspondingly, come later in the year, Northern Ireland could be set to endure a milk scarcity because farmers can no longer keep up with the skyrocketing costs of producing high-quality milk. If they can’t cover the basics, how can they be expected to continue running a farm business that is supposed to support a family and home?”

UFU carried out an analysis of the retail price of liquid milk. In February 2022 the average pint of milk cost 49p (86p per litre).

By week 28 March, the average pint of milk cost 60p (£1.05 per litre) – an increase of 22 percent. Last month the average base milk at the farmgate only rose by 1.75p.

Meanwhile fertiliser prices in NI are at the top end of the global scale* with over 300 percent inflation, fuel has more than doubled with red diesel costing £1.05/litre and animal feed prices continue to hit record levels.

“When dairy products are doing well in the market with prices rising, you would normally see an increase in the amount of milk being produced off the back of it as farmers want to take advantage of improved returns. However, the eyewatering productions costs are having the opposite effect,” Mr Gordon says.

“On average, 60 percent of direct costs on a dairy farm are attributed to feed, fuel and fertiliser. What’s even more worrying, is that the full impact of cost increases is still to be felt by the dairy sector. Farmers are struggling to keep their head above water as it is and if things continue like this, their cash flow will be well into the negative in a matter of months. We need retailers and processors to get behind our dairy farmers and help protect local milk production here in NI, so they can continue producing to meet consumer demand.

“It’s long been the UFU’s position that the dairy farmer’s struggle is largely due to the way milk is priced. Farmers’ extra production costs needs to be alleviated by those further up the supply chain. Otherwise, there is every likelihood that dairy farmers will reduce output in response to unsustainable input costs,” said Mr Gordon.

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