Be proactive on price swings
July 2, 2012
by Jeff Gelski
Commodity buyers for grain-based foods companies may have reason to breathe a sigh of relief this year. Prices are down for several commodities, including eggs, cocoa and sugar.
This year’s picture for the grain-based foods industry contrasts to the situation of the last half of the past decade, when commodity prices rose. It might be a good time, however, to put a plan in place for any future commodity price escalation. Buyers might be aware of alternative ingredients if commodity prices shoot up again and of global issues such as current egg prices in Europe and future cocoa demand in Asia.
Domestic egg prices have fallen in recent years after a surge in 2008. For example, nest runs on June 8 cost 49@54c per dozen, down from 54@58c per dozen on June 10, 2011. Yet egg prices in Europe and a Senate bill in the United States are worth watching.
According to a white paper presented by Soren Norgaard, senior manager of Arla Foods Ingredients, Europe implemented animal welfare legislation on Jan. 1, 2012. The Welfare of Laying Hens Directive bans the use of battery cages, forcing egg producers to accommodate hens in larger cages with more space to move and perch. Egg prices rose after the legislation went into effect.
Earlier this year Arla Foods Ingredients Group, a subsidiary of Arla Foods and based in Sonderhoj, Denmark, said it expects volumes of its egg replacing ingredients in 2012 to reach the equivalent of 40,000 tonnes of liquid whole eggs, which would be double the equivalent of 20,000 tonnes of liquid whole eggs reached in 2011.
London-based Tate & Lyle, P.L.C. developed a Hamulsion stabilizer system to enable egg replacement in bakery products in Europe.
“The challenge with bakery products when lowering egg content is to keep a fresh and moist product,” said Kerstin Werner, head of business development, Tate & Lyle Food Systems. “With our new stabilizer system solution, we managed to produce a moist muffin with similar product properties to the full egg version, and the feedback from our customers has been very encouraging.”
In the United States, a Senate bill introduced in May would require egg producers essentially to double the space allotted per hen and make other animal welfare improvements. A phase-in period would be designed to give farmers time to invest in housing.
“This legislation will help ensure the American consumers continue to have a wide variety and uninterrupted supply of eggs at affordable prices,” said Gene Gregory, president of United Egg Producers, which represents farmers who produce nearly 90% of the eggs in the United States. “Our industry is being endangered by the growing patchwork of differing and contradictory state laws and ballot initiatives that are impeding the free flow of interstate commerce in eggs that is so vital to grocers, restaurants, food manufacturers and consumers.”
Questions remain on whether the legislation will pass and what effect it might have on egg prices.
Arla Foods Ingredients Group offers a Nutrilac range of fractionated whey proteins that may replace eggs.
“Although eggs typically take up only 25% of the ingredient volume in an average cake (i.e., a pound cake), their cost is often 50% of the total ingredient costs,” said Phil Witcomb, marketing activity manager, Arla Foods Ingredients Group. “Seventy-four per cent of egg is water, with a cake only really utilizing the protein (15%) and fat (10%) of the egg.
“Using fractionation and modification technologies, we have discovered how to pull apart whey proteins and rearrange them for various functions that allow them to consistently perform just like eggs. So you get the functionality required without paying for unnecessary elements like water.”
The Arla Foods Ingredients Group white paper noted that fractionation separates the proteins by characteristic. Then the proteins may be arranged to produce various functions, including egg-like characteristics such as emulsification, whipping and gelling. Arla scientists are comparing the characteristics of baked foods, such as pound cakes and muffins, made using full egg recipes, using 50% egg-replacement recipes and using 100% egg-replacement recipes.
American Key Food Products, Closter, N.J., has introduced the Emfix line of emulsifying starches to the U.S. market as a way to replace eggs in baked foods. The company will distribute the starches, which were developed and manufactured by the Emsland Group in Germany. The starches have emulsification properties and provide structure for baked foods, particularly cakes and muffins, according to
American Key Food Products.
Penford Food Ingredients, Cen-tennial, Colo., offers PenTech NG, a non-allergenic blend that has been shown to replace whole egg and egg yolks for both liquid and dry forms in bakery products. PenTech NG provides such functional benefits as emulsification, moisture retention and texture.
J&K Ingredients, Paterson, N.J., offers Vita-Ex egg extenders that are designed to reduce the cost of using eggs in sweet goods, Danish, rolls, donuts, cookies and cakes by 20% to 66%. Vita-Ex is made of such ingredients as egg yolks and whole egg solids. Vita-Ex does not affect the flavor, volume or texture of baked foods, and it does not require
special handling of sweet dough.
International cocoa demand
Like egg prices, cocoa prices have fallen from a surge that occurred during the last decade. The International Cocoa Organization on May 30 revised its forecasts for the 2011-12 cocoa year and raised the world production forecast to 3,990,000 tonnes from 3,961,000 tonnes. On June 8, 2012, butterfat ratio N.Y. cost email@example.com per lb, which was down from $1.35@$1.40 on June 10, 2011.
Several factors may affect future cocoa demand and price. Blommer Chocolate Co., Chicago, said estimates are cocoa demand will rise by nearly 30% in the next 10 years. The rising world population and the development of countries such as China, India and Brazil will drive the demand growth.
“This increased demand threatens to outpace supply by as much as one million metric tonnes (25-plus of current supply) by 2020,” Blommer said.
Chocolate company Barry Callebaut, Zurich, Switzerland, already is experiencing international growth. Sales volume in its Asia-Pacific region rose by nearly 8% to 28,514 tonnes in the first half of this fiscal year, the company said when giving financial results April 2. Capacity extensions will offer additional growth potential in the region.
Both Barry Callebaut and Blommer are investing in cocoa. Blommer plans to invest an incremental $45 million in cocoa sustainability efforts by 2020. The company pledged to double its current farmer base to 100,000 from 50,000.
Barry Callebaut has launched a cocoa sustainability initiative called Cocoa Horizons. It is designed to boost productivity on cocoa farms, increase quality and improve family livelihood in key cocoa-producing countries.
Still, rising demand potentially may lead to higher cocoa prices and a need for cocoa extenders. Briess Malt & Ingredients Co., Chilton, Wis., has a CocoaPlus line, which involves whole grain specialty flours that mimic the color and functionality of cocoa and also enhance cocoa flavor.
“Introducing a new, whole grain ingredient as a replacement for even a small amount of cocoa powder in finished foods is, of course, a challenge,” said Bernadette Wasdovitch, marketing communications manager, for Briess Malt & Ingredients Co. “Our goal is to make manufacturers aware of CocoaPlus as an all-natural ingredient that can reduce input costs while helping solve availability issues, and then ask them to work with it in their labs with support from our technical services staff.”
Judie Giebel, technical services representative for Briess, said, “The CocoaPlus line is not intended to be a full cocoa powder replacer but to replace a percentage and enhance the cocoa flavor and color. Depending on the application and which CocoaPlus ingredient is used, the percentage will vary. There are many factors to consider. Is it a sweet or savory product? What type of additional ingredients are being added? What is the most crucial point, color or flavor or both.”
Sizing up sugar
Sugar prices are dropping this year, but they remain higher than 2007 prices. For example, Midwest beet sugar, f.o.b. plant, cost 46@48c per lb on June 8, 2012, down from 55@57c on June 10, 2011, but up from firstname.lastname@example.org on June 7, 2007.
An alternative to beet and cane sugar, bulk corn sweeteners were profitable for Tate & Lyle, P.L.C. in the fiscal year ended March 31.
“Despite world sugar prices falling from their peak in July 2011, they remained high by historical standards as a result of rising global demand against a backdrop of ongoing tight supply,” Tate & Lyle said when giving financial results May 31.
The Corn Refiners Association, Washington, also continues to promote high-fructose corn syrup as a cost-effective alternative to beet and cane sugar. Midwest 42% HFCS sold at 173/8@213/8c per lb on June 8, 2012.
Sugar was in demand in recent years when companies sought to make product claims of no high-fructose corn syrup. Mintel’s Global New Products Database findings for 2011 called into question how popular the no-HFCS claims were. U.S. new product introductions with no-HFCS claims in 2011 numbered about 400, or 2% of total new product claims in 2011.
Guar gum price has industry seeking alternatives
The grain-based foods industry less than two years ago paid under $1 a lb for guar gum, an ingredient used in many applications and known for providing such benefits as water-binding. Then the oil and gas industry found a use for guar gum in a new technique called hydraulic fracturing.
Prices for the ingredient began rising in 2011. Earlier this year guar gum prices were $20 per kilogram, or more than $9 per lb, according to the April 15 issue of “Hydrocolloid News,” an e-mail newsletter sent out by IMR International, a hydrocolloid consulting company in San Diego. The June 7 issue of “Hydrocolloid News” then reported prices for guar gum had fallen to about $15 per kilogram, or about $6.80 per lb.
“These are very rough numbers and are for indicative purposes only,” the June 7 newsletter said. “Buyers are having to check daily if not hourly. Efforts to replace guar in all applications remain unchanged for now.”
Grain-based foods manufacturers scrambling to find answers for the guar gum shortage should know ingredient suppliers offer alternatives:
Ashland, Inc. — Aquacel GSH and Aquasorb A-500 are cellulose gums that have been shown to either supplement or replace guar gum.
DuPont Nutrition & Health — Because of the recent Danisco acquisition, the company now offers such hydrocolloids as alginates, carrageenan, cellulose gum, guar gum, locust bean gum (LBG), microcrystalline cellulose, pectin and xanthan gum. Blends of hydrocolloids may act as guar gum alternatives.
Glanbia Nutritionals, Inc. — OptiSol 5000, a flax-based ingredient, has been shown to reduce guar gum use in tortillas, bread, sweet baked foods and batters. In tortillas, OptiSol 5000 offers shelf life, rollability and water-binding characteristics.
Grain Millers, Inc. — An oat hydrocolloid builds a matrix with gluten that improves elasticity, moisture retention and overall crumb texture, said Darren Schubert, vice-president of sales and marketing, West coast operations. The product is a blend of soluble and insoluble fiber along with pre-gelatinized oat flour.
Gum Technology Corp. — Hydro-Fi XCT-0123 incorporates xanthan gum, citrus fiber and tara gum. While tara gum belongs to the same family of seed gums as guar, citrus fiber improves moisture control.
Mühlenchemie — EMCEbest WA, a combination of enzymatic ingredients, serves as a replacement for guar gum powder for water absorption. Potential applications include bread, rolls and baquettes.
TIC Gums — Ticaloid GR 5420, a blend of gums, may replace guar in baked foods such as cake, bread, bagels and muffins.