Blog: New year, new pressure on commodity costs
Dean Best | 17 December 2009
After 2008's peak in commodity prices and 2009's subsequent falls, are we seeing signs that 2010 will herald the return of more expensive raw materials?
The EU has issued data that shows dairy prices have recovered since this summer and have risen during the autumn and into December.
The European Commission's numbers tally with trends that Fonterra, the world's largest dairy exporter have been talking about for months and, on Monday, the New Zealand dairy giant lifted the price it pays farmers for milk solids.
There are signs that sugar prices are rising with reports overnight pointing to lower crops in Brazil and suggesting that there will be pressure on supplies in Central America and Thailand.
And this week has also seen cocoa prices hit new highs amid concerns of production shortfalls.
Today, Ken Powell, boss of one of the world's largest food companies, General Mills, was walking analysts through a set of robust quarterly financial numbers from the business - but he hinted that he saw commodity cost pressure on the horizon.
"We expect to see a return to some inflation in some input markets," Powell said. "While input costs are currently favourable, we do not expect that to be a long-term trend. We believe we'll seen renewed input cost inflation in fiscal 2011."
However, while Powell and General Mills expect to see commodity cost pressure resume in the second half of 2010, the company said there are already signs that costs are rising - and having an impact on business strategy.
"We've seen dairy prices ease up and coincidentally we've seen some of the promotional activity in the yoghurt category ease off," the head of the Yoplait maker said.
With consumer confidence in many markets remaining fragile, expect the battle over pricing between manufacturers and retailers restart in earnest next year.
Retailers will be fighting to keep prices low; food makers will want to push through rising commodity costs. Some will win, others will lose.
We hear a lot in the food industry about two interconnected trends: and social media and “foodie” culture....
Nestle, set to welcome a new CEO on 1 January, has announced more changes to the make-up of its senior management team....
Blue Bell Creameries is trying to win back the trust of consumers after a fatal listeriosis outbreak last year was linked to its products - but in recent days the US ice cream maker has issued another...
The UK's competition regulator has given the all-clear to Hain Celestial's bid to buy UK food and beverage group Orchard House Foods, nine months after the US group announced the deal....
- General Mills on Q1, innovation, margins
- Interview: Mondelez's outlook for China
- Aryzta FY results, outlook for 2017 - 6 takeaways
- What next for Bernard Matthews? - comment
- Interview: Mondelez eyes sweet success in China
- ConAgra acquires Frontera Foods' "gourmet" brands
- Nestle close to finalising Garoto deal
- Nestle revamps foodservice arm
- Aryzta FY profits fall
- Nestle launches Nesquik Protein Plus for adults
- The Big 15: Strategies and Priorities of Top Packaged Food Players in Comparison
- Global Chocolate Confectionery Overview: Challenges, Opportunities and Risks
- Redefining Snacks: From Conventional Snacks to Snack Replacements
- Global Foodservice Market 2016-2020
- Constellation Brands, Inc. (STZ) - Financial and Strategic SWOT Analysis Review