There's been some talk of late about what's happening with peanuts and hence wholesale peanut butter prices.

Looking at the production side of things on a week-by-week basis since late August 2011, production has been fairly steady. Sure, there was a blip around the New Year where production plummeted, but all-in-all it's steady.

Looking at the prices though shows a different picture, where wholesale prices are around $.35 per pound vs the $.25 or so we saw all through August and September of last year.

Have a look at this graph that shows production vs. price. (Production is thousands of pounds; price is per pound.)





With most commodities, there's a clear correlation between production and price; in this case, the only thing we're seeing is a steady upward price trend that seems to be detached from production.

Looking back over the past few months and taking out the blips in price from November 12, 2011, and the blip in production from the New Year, production is fairly consistent, but prices aren't.

Well, I guess you could say they are in that they're consistently up.

What this means long term for manufacturers of goods who rely on peanuts and peanut butter remains to be seen, but when you're looking at a 50% increase in price at the producer level, it typically means two things:

1. short term: higher prices for manufacturers
2. long term: lower prices for manufacturers as more producers come online to take advantage of the higher prices
   

Whether or not it'll come to that remains to be seen, but given the current trends, I'd be surprised if prices don't go up--at least a little bit more--before they go down.

Labels: peanut butter, peanut butter prices, peanut prices, peanuts

Taking a look at the most recent Sugar & Sweeteners Outlook there's some interesting things happening with sugar production in Mexico.

As expected, sugar production/output from Mexico was down last month. What was a little unexpected was how much. According to the USDA's Sugar & Sweetners Outlook, production was down 330,000 metric tons.

Interestingly, even though production was down that much, the USDA lowered its forecast of Mexican sugar imports just 139,000 metric tons (from 449,000 to 310,000 metric tons.) Given the sizable drop in production, something doesn't seem to add up here, as the sugar has got to come from somewhere, especially given that there's no mention (or signs otherwhere) of declining consumption.

Meanwhile, looking at the production side, comparing 2008-2012, here's what the USDA reports:

Year	Area Harvested1	Sucrose Recovery2
2011-12	124,366	9.91
2010-11	132,486	10.95
2009-10	105,220	9.93
2008-09	109,513	11.18
1 Interim (hectacres/ha), through 1st week of January 2 Interim, through 1st week of January

What's the bottom line here? While it's still early to say, especially given the changes caused just by weather changes, it looks like Mexican farmers are having to harvest a significantly larger area to reach their output levels.

Meanwhile, the actual productivity of the sugar itself (i.e. the sugar recovery) is becoming less efficient and dropping. All-in-all, it's an unsustainable trend that would lead to higher wholesale sugar prices if it continues. That said, it's really just too early to say, especially given how much sugar the countries of the world now import and export from one another.

As much as I like tea personally, I seldom cover things like that in our blog since it doesn't have much to do with food ingredients or manufacturing.

This acquisition merits some attention here for a few reasons.

First of all, it shows one of the more interesting places where large manufacturers are looking for growth these days: the ultra premium market segment.

The interesting thing about that market segment is that in many way it's--at least largely--recession-proof. For consumers available to afford regularly purchasing Tea Forte's teas, they're a steady source of business.

However, there are another couple of interesting groups who're purchasing items like this, too. First, there are many curious consumers who aren't necessarily in the expected target market, but they're very curious what makes a product that's that much more expensive than competitors and if it's worth it.

The second segment are people giving gifts. Small as the segment may sound to be at first, it really does represent a lot of people, and not just at the traditional end-of-year holiday season.

There are all sorts of other occasions year 'round when people give food and food-related products as gifts. Birthdays, graduations, and congratulations celebrations are just a few examples. Often on occasions like these people buy things as gifts they wouldn't buy for themselves. And, Sara Lee profits.

So, even though the Tea Forte acquisition may not seem to make complete sense on the surface for Sara Lee, it actually may be pretty smart. Among other things, since it is largely recession-proof, Sara Lee is likely to be adding a revenue source that, especially over time, should prove to be reliable for them.

Further, because of Sara Lee's size and buying power, they're likely going to be able to cut costs and make the new division quite a bit more profitable. Everything from machinery to packaging to shipping may all benefit without having any effect on product quality.

This doesn't even count the various ways Sara Lee might be able to cross-sell to consumers.

The bottom line: in spite of economic pressure throughout, there are a lot of ways clever manufacturers can increase profits and bring in new revenue. One of the best ways of helping the bottom line: smarter ingredients purchasing, which is where we can help.

Getting manufacturers the best prices and delivery on all sorts of wholesale food ingredients has been our specialty for over 40 years.

Labels: food manufacturer acquisitions, food manufacturers, wholesale food ingredients

As the great Yogi Berra once said, "It's tough to make predictions, especially about the future."

As most of Yogi's great quotes do, it makes you laugh at his verbal foibles 'til you realize there's actually truth to what he's saying, even if he wasn't the most articulate in saying it.

In the case of what changes are likely in 2012 it's a year some people are already making bold claims about, particularly about sugar.

SugarOnline.com quotes Juan Cortina, president & CEO of Grupo Azucarero Mexico, in a piece on sugar production called, "Sweet outlook for sugar," saying, I think it's a rosy outlook in world markets going forward. We have a very bright future, especially in North America.

Even though it's a short statement, there are a couple of interesting things you might be parsing from it like I did. First, he mentions, the "rosy outlook in world markets," then he says, "especially in North America."

Hmmm. Which one is it? (Maybe Jose and Yogi are distant cousins?)

The funny thing is, even taking into account the various weather issues last year, he may well be right.

Another interesting tidbit from the sugaronline piece: NAFTA's effect on sweetner import/export. Turns out, Mexico's consumption of sugar was down last year thanks to more than 1 million tons of high fructose corn sweetener being imported into Mexico from the U.S.

So, while their national sweet tooth hasn't changed, what they're using to satisfy it has.

Given that there's now more sugar available for export by Mexico because of this trend, there's a substantial amount of revenue there in all that sugar all along the production and distribution chain, including as wholesale sugar and at the producer/consumer level. Someone, somewhere will snap it up.

Beyond sugar, looking at some of the other mainline ingredients like starch, China is, of course, one of the key nations to watch. Even if your company is sourcing starch produced in North America, other companies may be looking globally to find the right price for their production line.

And, like everything it becomes an issue of supply and demand. In this case, a boom year for Chinese corn can have a huge effect on prices globally on starch and a variety of other ingredients, no matter where you're sourcing yours.

That said, weather in recent years haven't been kind to China's corn production, particularly in 2009 when drought was very rough on China's corn exports.

As for sweeteners generally, including things like crystaline fructose, there continues to be more demand among consumers for "natural" sugar, meanwhile the need for alternatives to manufacturers is greater than ever.

With just about everything that's ingredients related, there is price pressure--both up and down--caused by weather, harvests, and production capacities.

So, what's to come of wholesale food ingredients prices in 2012? Maybe Yogi wasn't so far out there after all: it really is hard to make predictions, especially about the future.

Regardless, smart manufacturers are already securing contracts now.

This way, if prices go up (or even skyrocket) for a particular commodity, you'll be laughing all the way to the bank. On the other hand if prices drop, at least you'll know now what your manufacturing costs are and have protection against the higher prices that can affect your bottom line.

Labels: commodities prices, crystaline fructose, wholesale food ingredients, wholesale sugar

With more than 2,200 farms involved, according to the Nestlé press release about the dairy standards partnership, the goal is to improve milk quality, safety and sustainability.

By anyone's estimate Brazil is an important producer of milk; Nestlé definitely understands this and is showing some great long-term thinking by participating.

Sure, there's a profit motive behind it all, but there's also a lot going on to help the farmers, the cows, and the quality, too.

Farmers will be helped to improve milk storage as well as the use and cleaning of equipment.

"They will receive training in basic veterinary skills, as well as training to improve animal welfare and milking parlour conditions.

"Farmers will also be shown how to reduce the environmental impact of their activities by setting up better wastewater treatment and drainage systems.

Perhaps best of all: it's not a small "pilot" project, as It is expected that 2,260 farms will start to adopt the recommended practices by the end of 2012.

All-in-all, it's a win for everyone involved; we wish more companies had this type of forward-thinking. Good work, Nestlé!

In the quest for low-sodium foods that keeps the right flavor, the technology known currently as "Soda-Lo," by U.K. based Eminate Ltd, is a huge development, and now Tate & Lyle has the exclusive deal on it worldwide from soup to nuts, including:

• manufacturing
• product development
• marketing
• sales

According to the Tate & Lyle press release on Soda-Lo,

The product, currently known as 'SODA-LO®', enables added salt levels to be reduced by up to 30% in foods such as bread, pizza bases, pastry, savoury pie fillings, cheese and baked snacks.

By most any measure, a 30% reduction in salt is huge, and here's what even more interesting: it's already in use by several well-known food manufacturers, primarily in the UK and USA....

Given the importance of reducing sodium for the consumer and Soda-Lo's salt-reduction promise, Soda-Lo is something more and food manufacturers worldwide are already working into their product testing.

Labels: Eminate Ltd, low-sodium, salt, Soda-Lo, sodium reduction, Tate and Lyle

Over the past few decades, high fructose corn syrup (HFCS) has been criticized with some very biting comments.

With it's reputation for contributing to obesity and related health issues in America, it's easy to see how the term 'HFCS' could leave a bad taste in your mouth.

In 2004, a couple of well respected university professors even stated that HFCS was uniquely responsible for the obesity epidemic in the US.

With a ratio of fructose to glucose nearly identical to that of ordinary table sugar, the bad press seems a little unfair, according to the Corn Refiners Association (CRA) and several supporting US senators.

In response, the CRA has recently petitioned the FDA to allow food manufacturers to use the term 'corn sugar' rather than HFCS. They argue that many consumers are misled by the ingredient name, due to the current negative stigma.

In support, several US senators have also petitioned for the name change with hopes to change public opinion. The senators argue that HFCS is mischaracterized in the market place largely because of its name.

They declare that the manufacture of HFCS keeps food affordable for American consumers and creates high-paying jobs here at home.

The also assert (with support from nutritional experts) that HFCS is actually just sugar made from corn.

Biochemists concur that HFCS is basically the biochemical equivalent of sucrose. One product, HFCS 42 (commonly used in foods) is actually lower in fructose than ordinary table sugar.

Quick to dissent are the sugar refiners and farmers, who are trying to stop the CRA's efforts with various lawsuits, etc.

In support of US corn refiners and farmers, the CRA retorts:

CRA members have the same interests as the broader food industry and consumers in promoting a clear and accurate food labeling and in assuring that all ingredient producers are permitted to compete on a level playing field.

In other words, if food labels can describe food ingredients as 'cane sugar' or 'beet sugar,' why not 'corn sugar'?