‘People are tearing up contracts’: Rice price spills over into new UK territory | Inflation

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Jhe 20kg sacks of rice stacked on ceiling-high shelves look like any other, but are the first to arrive at the West Yorkshire depot from Vietnam as food price shocks fueling the inflation force companies to find cheaper ingredients.

Jason Bull, one of the directors of Eurostar Commodities, which imports rice and flour for chain restaurants, supermarket suppliers and caterers, says the Brighouse-based company faces its biggest challenge for almost 30 years.

“Brexit, Covid, the cost of living crisis and the war in Ukraine are all impacting the supply chain in different ways and causing food insecurity,” says Bull.

“People tear up contracts and say the price just went up…if you want it, you’re going to have to pay more. This is the most difficult and turbulent time for our company in its history.

price of rice

With UK inflation now at 9.1%, driven by soaring fuel and food prices, Bull said pressure on the family business continued to mount, which would likely result in more suffering for households. Often the reason prices go up for consumers is because businesses facing rising costs pass them on.

“Fuel continues to increase, which increases our costs, and shipping rates also increase, so we’re not off the hook yet,” Bull says. “We’re going to see more inflation; I think it will probably reach 12 or 13%”.

The company is passing on higher costs to customers with the extra time involved in Brexit paperwork, another management concern. “We work on tight margins and high volumes,” says Bull, who adds that it “has never been more difficult to ensure food is in the supply chain and to get it on time. timely and at the right price”.

Rice, along with pasta and bread, was one of the budget foods recent figures from the Office for National Statistics showed prices rising at a rate much faster than general inflation, the option cheapest rice market now costing 15% more than a year ago.

Supermarket shoppers spend around £220m a year on rice, with the overall price per kilo up 0.8% in the last three months compared to 2021, according to NielsenIQ Scantrack. The overall figure masks significant upward and downward price movements for different varieties. Basmati, which accounts for 60% of the market, is up 3.7%, with risotto rice also rising by a similar amount. The price of brown rice rose more than 13% while Thai fell more than 10%.

Eurostar Commodities generally buys short-grain rice, used to make sushi sold in supermarkets, from Italy, Europe’s largest producer. However, the price per tonne is now “crazy”, says Bull, due to reduced harvests caused by a severe drought.

Previously, she could buy rice on a 12-month contract, but her longest contract is now less than two months. “You will probably be able to buy Italian rice this year, but the price will skyrocket. Millers say they have never seen a market like this in 40 or 50 years.

Difficulties in supplying long-grain rice in Europe means that Eurostar Commodities has turned to US imports. Photography: Christopher Thomond/The Guardian

Last spring, Italian white rice hit the $1,000 (£817) a tonne mark, but it didn’t stop there. Weather issues combined with higher input costs like fertilizer, saw the price eclipse $2,000 last month. During the same period, the cost of Vietnamese white rice fell by a fifth to about $400 a ton, according to Mintec.

Bull has just returned from Vietnam, the world’s fifth-largest rice producer, where he visited some of the fields and mills belonging to the licensed British suppliers he now uses. “There will be a lot less rice in Europe and that will increase demand for the Far East,” he says. “Vietnam only grows a certain amount of EU standard rice, so if you’re not under contract and don’t reserve it, it won’t be there.”

Long-grain rice is also a problem. The company typically sources its supplies from Spain, but farmers there have also been affected by drought and extreme temperatures. In the fall, he predicts there will be no more rice to export, which explains the huge white sacks adorned with stars and stripes piled on the warehouse floor. Even though it comes from the United States, it’s still cheaper, says Bull.

The Food and Agriculture Organization’s monthly index, which tracks changes in the price of commonly traded food commodities, showed that international rice prices rose for a fifth straight month in May.

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Global rice production is plentiful, with a record harvest of 514.6 million tonnes expected, but the high cost of wheat and maize means it is in demand as a substitute for animal feed, says Zanna Aleksahhina, an analyst at market to data company Mintec.

Eurostar Commodities also imports specialty flours as well as ingredients such as canned tomatoes and pasta sauce that end up in ready meals and restaurant meals. Prices are also rising for these products, with wheat flour costing 50% more than before the war.

The impact of this is visible on supermarket shelves where the price per kilo of regular and self-rising flour is up 9.6% and 7.4%, according to NielsenIQ Scantrack data.

“We’ll have to see what the new [wheat] that the harvest brings,” says Bull. “It depends a lot on which countries are going to export, but if nothing drastically changes…prices will stay firm.”

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