Food Ingredients & Commodities Prices for 2012

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