KANSAS CITY — The 13 food product ingredient indexes calculated by Sosland Publishing Co. declined an average of 27% in 2008, reflecting decreases in the value of most basic commodities, while the Consumer Price Index for food and beverages rose nearly 6% during the same period, the most of any component in the Bureau of Labor Statistics index.
While the comparison isn’t necessarily "apples and apples," it does appear to illustrate a lag between prices at the producer and processor levels compared with those at retail, which apparently still has yet to see most of the downturn in commodity values. Commodity prices were sharply higher early in 2008 before dramatically reversing course.
The Sosland indexes, listed on the final page of "Ingredient Markets" under Food ingredient indexes and Bakery ingredient indexes in each issue of Food Business News (see Page 54 of this issue), incorporate basic industry formulations and prices gathered by Sosland market editors. Declines in the Sosland indexes ranged from 1% to 58% for the year and averaged 27%.
The most direct comparisons may be made between the Sosland "pasta" index, which declined 52% from a year earlier, and the C.P.I. "spaghetti and macaroni" component, which gained 34% on the year. Also comparable are the Sosland "white pan bread" index, which dropped 30% for the 12-month period, and the C.P.I white pan bread component, which rose 11%.
As a whole, the seven Sosland Bakery ingredient indexes declined an average of 29% from the end of 2007 to the end of 2008, with the smallest decline of 16% recorded for "devil’s food cake" and the largest decline of 52% for "pasta." The declines in the Bakery ingredient indexes largely reflect sharply lower wheat and flour prices, which peaked at record highs in the first quarter of 2008. The price of hard wheat flours, used mostly to make bread, topped out at $32.95 a cwt in Kansas City and $45.20 a cwt in Minneapolis in late February but had declined 51% and 62%, respectively, by Dec. 31. The price of Chicago soft wheat flour, used mainly in bakery mixes, cookies and crackers, peaked at $28.30 a cwt in mid-March and dropped 51% by the end of the year. And the price of durum flour, or semolina, used to make pasta, hit a record high of $65.30 a cwt in late February, only to plunge 64% by the end of December 2008.
The cereal and bakery products index of the C.P.I., meanwhile, ended 2008 nearly 12% higher than a year earlier, on an unadjusted basis, and more than 9% on an adjusted basis, the largest increase since nearly 11% in 1980.
The six Sosland Food ingredient indexes ended 2008 down an average of 24% from Dec. 31, 2007. Included was the smallest decline, 1% for "milk chocolate bar," reflecting higher sugar and cocoa prices offset by lower dairy prices, and the largest decline, 58% for "mayonnaise," reflecting sharp declines in soybean oil and egg yolks more than offsetting a modest increase in corn sweetener prices.
With the exception of sugar, corn sweeteners and cocoa, most ingredient prices ended 2008 well below year-earlier levels. The price of bulk refined sugar ended 2008 up 33% to 43% from a year earlier, corn sweeteners up 6% to 9%, and natural cocoa powder up 28%.
Changes in dairy product prices were perhaps the most dramatic, with nonfat dry milk values down 43% to 49% for the year and volumes flowing into storage at the government support price since last October. Prices for 34% whey protein concentrate dropped 63%, dry whey 64% and buttermilk powder 55%. Prices for most dairy products peaked in mid-2007.
Prices for many other food ingredients also showed sharp declines in 2008, including dried egg yolk values down 23%, soybean oil down 33%, oats flakes down 17% and peeling apples down 50%.
As the year ended most hog, cattle and dairy producers were losing money, despite sharply lower feed costs, while grain farmers were deciding which crops to plant based on what they thought would be most profitable in 2009. A major difference from a year ago — grain and oilseed prices were rising sharply at this time of year, farmers were coming off one of their most profitable years ever and the severity of the economic downturn was far from realized. Now market prognosticators certainly are not painting a "rosy" picture for ingredient values in 2009, especially with much of the effect of the recession on retail food prices and demand still evolving.
This article can also be found in the digital edition of Food Business News, February 3, 2009, starting on Page 22. Click