Blog: Dairy prices and organic food: nothing is certain
Dean Best | 31 August 2009
In recent weeks, the soaring price of sugar has focused the minds of the world's leading food makers.
But, in recent days, dairy prices have grabbed the commodity headlines. After a recession-fuelled slump in the price of dairy commodities, is a recovery on its way?
Unsurprisingly, given the volatile nature of that market, the jury is out. Some, like US dairy giant Dean Foods, believe prices are on the way back up. For others, including agribusiness analysts Rabobank, the market will not turn around until there is a sustained recovery in the global economy.
For some of the world's largest dairy processors, the uncertainty is having a profound effect on business. Last week, Bongrain, one of France's largest dairy groups, reported tumbling half-year profits and warned investors the unpredictability in the dairy market meant it was unable to provide forecasts for 2009. The outlook also looks uncertain at Irish cheese giant Glanbia, where more cost cuts look likely to offset falling dairy revenues.
Elsewhere, uncertainty is also hanging over Hain Celestial, the US natural and organic food group. After posting a loss for fiscal 2009, the company's senior management is bullish about the year ahead, despite the current sagging demand for organic food. However, analysts covering Hain are less bullish, believing that the company will need to spend heavily in the next 12 months to improve distribution and to boost flagging sales growth.
Sticking with the US organics sector, some clarity has been given on the future of natural and organic food group Tree of Life. The company, which distributes lines from Hain Celestial, Kraft Foods and Dean Foods' Horizon Organic alongside its own namesake products, will be sold, its Dutch parent Wessanen told us last week.
Wessanen had been mulling the future of Tree of Life for months but has now decided a sale would help the Dutch company pay down debts and expand in Europe.
US distributor United Natural Foods (UNFI) has been cited as a possible buyer of Tree of Life. UNFI's finance chief Mark Shamber refused to comment when contacted by us last week - will the company make its intentions known when it announces its annual results next week?
Editor's note: just-food is closed today (31 August). It's a (sunny) public holiday here in the UK. We're back at the coalface tomorrow.
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