Aurelia Butler

Steep rises in the prices of sugar and cocoa are set to hit sweet treat lovers’ wallets as extreme weather conditions hinder production, even as broader measures of food inflation ease off.This month sugar prices hit their highest level in 12 years and cocoa futures reached a four-decade high, in a move which analysts said was likely to feed through into higher prices for hot drinks and confectionery.Chocolate manufacturers and processors have been “praying for prices to drop all year and they just haven’t”, said Andrew Moriarty, price reporting manager at Mintec. Instead, they are set to rise further, he said: “We can expect costs to start being passed on to consumers soon.” Consumers can also expect further “shrinkflation” in product size and substitution of ingredients to cut costs, he added.The price rises have been driven by supply fears as the El Niño sea temperature phenomenon, coupled with rising temperatures resulting from climate change, bring extreme heat to parts of Asia and diminished rainfall to West Africa, threatening yields of sugar, cocoa and coffee.“What’s really driving these price rises is the prospect of a [supply] deficit in 2023-24,” said John Stansfield, senior sugar analyst at DNEXT.Food manufacturers have signalled they will pass on the latest cost increases. François-Xavier Roger, chief financial officer at the world’s largest food manufacturer Nestlé, told investors this month the company did not plan to raise prices much higher except “on a selective basis for some categories where we still see some input cost inflation, like for cocoa, for sugar, for robusta, for coffee”.In the UK confectionery prices rose by 15 per cent in the year to June, while in the US candy prices jumped 9.4 per cent in the year to August. Despite this, sales have proved resilient. Analysts said that although shoppers have cut back other spending, they tend to regard treats such as confectionery as affordable luxuries.That has proved a boon for manufacturers. Cadbury maker Mondelez and Hershey have both raised their profit forecasts for the year. “The advantage of cocoa and confectionery is it’s a very resilient market,” said Bruno Monteyne, analyst at Bernstein. “People keep eating chocolate.”Sugar prices rose after unseasonably dry weather in the southern states of Karnataka and Maharashtra hit production in India, the world’s largest sugar producer. Analysts forecast a 4mn-tonne production shortfall in the 2023-24 season from the 32.8mn tonnes produced a year earlier.A shopper browses Hershey’s Chocolate World in Pennsylvania, US. Hershey has raised its profit forecast for the year More

New post-Brexit rules for trade between Britain and Northern Ireland begin to come into force this weekend, but for wholesaler Derek O’Reilly, they are already a headache.Under the rules, which take effect from Sunday, food and drink suppliers will use a “green” lane with less paperwork for goods entering Northern Ireland from Britain that are staying in the region, and a “red” lane, with more checks, if they are travelling on to Ireland or the wider EU.“Some [of my suppliers] are choosing the green lane, which makes life harder — it restricts me selling the product into southern Ireland, which isn’t ideal,” said O’Reilly, managing director of O’Reillys Wholesale, a Northern Ireland-based distributor of brands including Walkers crisps, Quaker oats and Cadbury’s chocolate.O’Reilly added that some of his suppliers are not ready for the new rules and have their “head in the sand”; one brand could halt some of his deliveries for a few weeks while it prepares. “Other companies are in a similar situation,” he said. The new system is part of the Windsor framework agreed by the UK and EU in February to resolve years of acrimonious Brexit wrangling.When he announced the deal, UK prime minister Rishi Sunak said it removed “any sense of a border in the Irish Sea”. But businesses still face some paperwork, albeit heavily reduced, if they join a trusted trader scheme that gives them access to the green lane.The agreement gives Northern Ireland unique access to both EU and UK markets but opposition from the Democratic Unionist party, the largest pro-UK political grouping, has brought down the region’s executive at Stormont. London and Brussels have made clear they will not renegotiate the Windsor framework to assuage the DUP’s concerns.Writing in the Belfast News Letter, a unionist newspaper, on Saturday, DUP leader Sir Jeffrey Donaldson said his party would not be “bullied or cajoled”. He called for “greater flexibility” in the operation of the red and green lanes and said “a pathway to fully-functioning institutions at Stormont will only emerge if Northern Ireland’s place in the United Kingdom is protected in . . . UK law”. “We haven’t come this far to accept arrangements that fall short of what the prime minister promised to deliver,” he wrote. “This is a time to hold our nerve.”In the same paper, Chris Heaton-Harris, the UK’s Northern Ireland secretary, wrote that the government was “in the final stages” of constructive talks with the DUP. “We are pulling together a comprehensive package of proposals that we hope will address their concerns,” he said. The new Windsor framework rules will be rolled out gradually with the red and green lane system extended from food and drink products to all other goods and parcels in October 2024.Many suppliers and manufacturers are expected to opt for the red lane eventually, despite the more onerous paperwork required, in order to keep open the option of selling into the EU in future. Peter Hardwick, trade policy adviser at the British Meat Processors Association, said a number of its members “are reporting . . . [they] will opt for the red lane”.Carol Lynch, partner head of customs and international trade services at consultants BDO Ireland, said anyone seeking to use Northern Ireland as a “gateway to Europe” would use the red lane. “That will be a big portion going forward as Northern Ireland positions itself to have dual access to both the GB market and EU markets,” she added.For some critics of the agreement, “until this point, maybe there was a hope the UK would change its approach. From this weekend, it’s clear that’s not happening,” said Stephen Kelly, head of trade group Manufacturing NI.The red and green lanes simplify the problem of granting the region “unfettered” trade with Britain, a key DUP demand, but the new system remains complex and will take time to bed down.Nichola Mallon, of Logistics UK, says the new system will be ‘a huge learning process’ More

ROME (Reuters) – Italy aims to raise at least 1% of gross domestic product (GDP), or roughly 21 billion euros ($22.2 billion), through asset sales between 2024 and 2026, the Treasury said in its Economic and Financial Document (DEF) published on Saturday.The plan is part of Prime Minister Giorgia Meloni’s efforts to keep in check the euro zone’s second-largest debt pile as a proportion of GDP, while investors keep a close eye on Rome’s creaking public finances.Italy’s debt-to-GDP ratio is seen edging down to 139.6% in 2026, from 140.2% this year.The new targets factor in the proceeds of asset disposals expected in the next three years, the DEF said, showing that without the sell-off plans the debt burden would probably rise.Economy Minister Giancarlo Giorgetti said in the document that the stake sales would involve companies that are subject to privatisation commitments already agreed with the European Commission.This is a reference to bank Monte dei Paschi di Siena (MPS), which was bailed-out in 2017 at a cost of 5.4 billion euros for taxpayers.The Treasury is expected to hire advisers for the bank’s re-privatisation process, bankers said, though Giorgetti recently poured cold water on the prospect of quick action by saying the government had no urgent need for cash.Italy will also sell shares in companies in which the Treasury’s stake “exceeds that necessary to maintain an appropriate coherence and unity of strategic direction”, Giorgetti added, without providing further details.However, Italy’s governments have a record of missed privatisation targets dating back to before the COVID-19 pandemic, which triggered a long spell of expansionary fiscal policy that has not yet ended.In 2018, the then Prime Minister Giuseppe Conte pledged to raise some 18 billion euros from asset disposals by the end of the following year to help lower the debt and reassure investors, but the plan produced no results.($1 = 0.9461 euros) More

MILAN/ROME (Reuters) -Italy on Friday increased its estimate for debt issuance this year due to its worsening state finances and delays in transfers from the European Union, the only major euro zone country to do so. The upward revision comes as Rome’s borrowing costs are steadily increasing amid growing scrutiny from investors concerned about its weakening economy and fiscal slippage.In its issuance programme for the fourth quarter released late on Friday the Treasury raised its estimate for gross debt issuance this year to 333 billion euros ($351.95 billion).That compared with its forecast of 310-320 billion euros made at the start of the year.The increase will push up Rome’s record 2.85-trillion-euro public debt, already the second highest in the euro zone as a proportion of gross domestic product (GDP) after Greece’s.Other European countries have moved differently this year.Germany reduced its needs in the fourth quarter by 31 billion euros ($32.59 billion). Portugal and the European Union took similar steps.France raised its bond issuance next year due to an increase in debt redemptions but left unchanged its plan for this year. Forecasts approved by the government on Wednesday estimated the debt-to-GDP ratio would be stable at around 140% from 2023-2026, rather than declining towards 60% as was required under European Union budget rules before they were suspended in 2020 due to the COVID-19 pandemic.The Treasury’s latest Economic and Financial Document issued on Saturday also projected 23.5 billion euros of measures through 2025 to be financed through extra budget deficit.DELAYED EU FUNDSThe Italian government’s funding needs are being further complicated by its difficulties in meeting policy conditions set by the European Commission in return for billions of euros of post-pandemic Recovery Funds.JP Morgan predicted in a note to clients on Friday that a delay in receiving an overdue second tranche of the EU funds would lead to an increase in Treasury bill or bond issuance this year to cover the temporary funding shortfall.The Treasury has so far covered around 80% of its 2023 gross funding needs, it estimated on Friday. Analysts had previously estimated a figure of around 90%.Meanwhile, Rome’s borrowing costs are rising.The gap between Italian and German 10-year yields – a gauge of market sentiment towards high-debt Italy – rose to 200 basis points in early London trade on Friday, the highest since March.At Italian auctions on Thursday 10-year BTP yields touched their highest level in 11 years.At end-August Italy’s average cost of funding stood at 3.62%, the highest level since 2008 and up from 1.71% in 2022, the Treasury said.Prime Minister Giorgia Meloni said on Friday she was not worried by the recent rise in Italian bond yields.For the fourth quarter, the Treasury estimated gross issuance of medium and long-term bonds at around 60 billion euros, with issuance net of redemptions seen at a negative 12 billion euros over the same period.($1 = 0.9462 euros) More