Earlier this week, the UK’s Office for National Statistics (ONS) revealed that UK inflation had fallen by more than expected to a still-high 7.9% from 8.7% the previous month and is now at its lowest point in a year.

However, UK inflation is still higher than the EU average of 5.5% and more than double the current US rate of 3%.

Although also falling, food and non-alcohol drinks inflation remains stubbornly high at 17.4% in the year to June, falling from 18.4% in May.

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While there is now a view that food price inflation peaked at 19.2% in March, it remains stubbornly high at more than twice the rate of overall inflation.

Why it matters to Irish farmers

While we may be inclined to have just a passing interest in UK inflation in a similar way to UK politics, in reality food price inflation in the UK has a bigger impact on Irish farmers than what is happening at home.

That is because it remains our number one export market in all commodities and greater volumes of production from Irish farms are sold in the UK than at home in many cases.

With this in mind, UK consumer shopping behaviour really matters and this is greatly impacted by the overall high level of inflation and, in particular, food price inflation.

When consumers are financially squeezed, as they are at present, they look for cheaper options to help them spread their money as far as possible.

That means when it comes to food choices, what are considered more luxury items are passed over in place of an acceptable substitute that is cheaper.

For example, lamb is consistently the most expensive meat and is regarded as a luxury special occasion product.

However, it is easily substituted by beef which has comparable eating characteristics or, if a much cheaper alternative is required, chicken is much cheaper and the most popular meat in the world.

Retailer pressure

With food price inflation running at twice the level of overall inflation, it has inevitably attracted political attention in the UK.

It is clear that supermarkets are squeezing suppliers, who, of course, pass the squeeze on to farmer suppliers, as Irish farmers will have noticed to their cost over recent weeks.

As well as being vulnerable in the retail sector, agri food sales are also exposed in the wider hospitality and catering sectors

Retail milk price has been a target in both the UK and Ireland and while there may be an option for dairy processors to convert milk into butter or cheese, the reality is that liquid milk is considered one of the staple food products, while cheese, butter, beef and lamb are all perceived as luxury products.

As well as being vulnerable in the retail sector, agri food sales are also exposed in the wider hospitality and catering sectors.

Institutions that are funded by public money are likely to have faced costs rising faster than income over a prolonged period.

Inevitably, they will be looking around to see where savings can be made and, again, agri food choices will have an impact.

They may still need to buy milk, but vegetable oil spreads are considerably cheaper than butter and chicken will substitute very satisfactorily at a lower price point per kilo for beef and lamb.

It also extends to the catering and hospitality sectors. When consumer’s budgets are squeezed, eating out and entertaining are less frequent and, when it happens, people are more cost conscious and beef and lamb are particularly vulnerable, as are the higher-value dairy-based products.

With production costs remaining high, farmers need every cent they can get for the produce leaving the farm.

Yet there is a tipping point where if a product is perceived by consumers as too expensive given their circumstances, then it gets overlooked in favour of a cheaper option.

The problem for farmers becomes even worse when similar products are entering the market from outside with a much lower cost of production, which in turn increases the squeeze on Irish prices.

Irish farmers need an improvement in international markets immediately to give market options and for beef and a slightly lesser extent dairy that means Asian markets, particularly China.