Midyear ingredient prices up sharply for all but dairy

by Ron Sterk
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KANSAS CITY — A midyear review of commodity, ingredient and energy prices reveals that nearly all items, with the exception of most dairy products, were well above year-ago levels, adding gravity to a Food Business News cover story headlined "Soaring commodity prices just beginning to impact retail."

That story was in the July 24, 2007, issue of the magazine. Since then prices have continued to rise, although many were off highs and record highs set earlier this year or last year based on prices tracked by Food Business News.

As feed prices have risen sharply, in part reflected by higher corn and soybean meal values, most dairy product prices have dropped substantially from last year, when most items were peaking with several setting record highs in the second and third quarters.

Low- and medium-heat nonfat dry milk prices were down 34% from a year ago and dry whey plunged 63% as of late June. Increased milk production and output of dried items along with some easing in domestic and export demand in part related to price resistance, have contributed to the lower prices.

But values for nearly all other ingredients have risen, although some, especially grains, already have dropped considerably since midyear.

Cash cocoa prices have increased 38% during the year period while New York cocoa futures prices rose to 28-year highs in June. A weak dollar and somewhat tight supplies, especially for higher quality cocoa, have boosted prices.

Dried egg product price increases have varied, with dried whole egg up 56%, dried whites up 13% and dried yolk up 93% from a year ago. Despite the large gains, some egg producers were at or below breakeven because of higher feed costs from a year ago.

Midwest beet sugar prices at the end of June were up 40% from June 2007 and have since risen to their highest level since the weeks after hurricane Katrina in late 2005.

Several factors, including a loss of cane refining capacity, fewer planted acres of sugar beets, higher corn prices and smaller-than-expected shipments from Mexico have contributed to the rise.

Midyear cash soybean oil prices were up 90% and corn oil prices were up a whopping 130% from last year. Soy flour prices increased 65% and corn meal prices increased 68%. Corresponding futures prices (Chicago July contracts) were up 130% for corn, 86% for soybeans, 81% for soybean oil and 87% for soybean meal. Corn futures set record highs in the last week of June with some 2009 contracts over $8 a bu, while soybeans snagged record highs above $16 a bu in the first week of July. But most corn futures prices dropped about $1 a bu, more than 10%, with soybeans down modestly, since the last week of June because of improved growing conditions in the Midwest.

Cash prices for long-grain milled rice were up 122% from the end of June last year, while the Chicago July rough rice future was up 80%. Rice futures peaked in late April following an unsupported global "panic" in fear supplies could run out. Global rice production is expected to be record large this year.

Milled oats flake prices had increased 29% with cash oats prices (Minneapolis) increasing 54% from June to June. Oats futures largely followed corn prices, but U.S. oats plantings in 2008 are record low and Canadian area is down 19% from 2007. Oats supplies are expected to be adequate due to carryover of a large 2007 Canadian crop.

Kansas City hard red winter wheat cash prices were up 62% from the previous year, July wheat futures were up 55% and bakers standard patent flour prices were up 48%. Hard red spring wheat in Minneapolis was up 78% with the July future up 95% and spring standard patent flour up 65%. Cash soft red winter wheat in Chicago was up 54%, the same as the corresponding July future price, while soft wheat flour was up 16%. Global wheat production this year is forecast to be record large.

Cash durum prices at the end of June, meanwhile, were up 113% from a year earlier and semolina prices were up 102%. Both dropped 38% from their late February peaks, however, as 2008 durum seedings have soared 25% in the United States and 27% in Canada from last year.

Wheat futures prices in Kansas City and Chicago have dropped about $1 a bu, or about 10%, since late June mostly on harvest pressure from winter wheat.

Energy prices, which affect ingredient sellers as well as buyers, have soared to record levels. As crude oil was up 94% at the end of June and fluctuated widely since, diesel prices were up 64% and ethanol prices were up 50% from a year earlier. Diesel prices set a new record high as of July 14 with a national average retail price of $4.764 a gallon.

This article can also be found in the digital edition of Food Business News, July 22, 2008, starting on Page 21. Click here to search that archive.

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