Vanilla ice cream's dairy components decline in price

by Laura Lloyd
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KANSAS CITY — Butter prices recently hit seven-month lows and dry skim milk prices were steady to modestly down as well, according to the Food Business News vanilla ice cream ingredient index.  The declines in the all-important dairy component of ice cream are responsible for a 2% decline in the price of an industry standard formula for vanilla ice cream on Jan. 11 compared with the previous week. The price changes were included in the food ingredient index in the Jan. 15, 2013, issue of Food Business News.

Other ingredients monitored as part of the price of vanilla ice cream in the index are costs each week for Midwest beet sugar and corn syrup solids. There was no price change in the week for either of the ingredients that supply the sweetness to ice cream.

Softer dairy prices were in keeping with a generally weaker demand picture for the first half of 2013, according to a report published in late December by Rabobank. Key buyers were seen to have booked a significant amount of forward coverage, removing upward price pressure for the time being.

Rabobank also pointed out that a premium built in to U.S. milk prices over milk from other countries appeared to have collapsed, leading to generally lower milk prices. As the first half of 2013 progresses, though, milk prices were predicted to firm as world supplies tighten and an eventual upward price trajectory again takes hold.

Sugar beet prices have fallen 40% from a year ago on heavier supplies and the trend continues to favor lower values. Corn syrup solids, which also function as a sweetening agent in ice cream, have tended to be relatively stable in price. In the short term, neither of these ingredients changed in price from a week ago.

A year ago in mid-January, the vanilla ice cream index in Food Business News was 127.1, compared with 119.1 as of Jan. 11, 2013. That represents a 6% year-over-year decline in the overall price of vanilla ice cream.

The cost of vanilla extract, which isn’t included in the Food Business News ingredient index for vanilla ice cream, is expected to rise in price in 2013 on factors such as falling global production, strong demand and shrinking vanilla stocks in producer countries such as Madagascar and Mexico.
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