Corn sweeteners, cocoa powder and egg prices are up sharply.

While prices for several raw commodities and other ingredients are down sharply from last year with some at multi-year lows, corn sweeteners, cocoa powder and egg prices are up sharply over this same period, and all for different reasons.

As August came to an end, December futures were down about 25% for Kansas City wheat, down 20% for Minneapolis wheat and down 10% for Chicago wheat, and cash durum prices were down 20% from a year ago. Corresponding flour prices were down about 25% for bakers’ standard patent (K.C. hard red winter wheat) and down 30% for spring standard patent (Minneapolis hard red spring wheat) but up slightly for cracker flour (Chicago soft red winter wheat). Widespread occurrence of vomitoxin has limited the supply of milling quality soft red winter wheat, which has supported futures and cash basis levels, and thus soft flour prices. Semolina prices (durum) were down more than 20% from a year ago.
Abundant world supplies are expected to limit exports and thus upward price potential for hard red winter wheat, and large and high quality spring wheat and durum crops are expected to keep a lid on those prices. More uncertainty exists in the soft wheat market, and values are expected to remain strong.

Edible oil prices show some variation with soybean oil down about 20% from a year ago, canola oil down about 15%, palm oil down 23% and loose lard down 33%. Peanut oil, meanwhile, was about flat at the end of August, corn oil was up about 15% and sunflowerseed oil was up 20%. Nearly all of the pricing moves in edible oils were attributed to supply with increased supply pressuring values and tighter supplies offering support.

The most dramatic price declines from last year have been in dairy products, with dry whey and lactose down more than 60%, nonfat dry milk, buttermilk and 34% whey protein concentrate down more than 50%, cheddar cheese down more than 20% and butter down about 15%. A combination of increased domestic and ample global supplies has pressured dairy prices worldwide, with some at 13-year lows in August. Most see prices near their bottom, but with limited upward potential the next few months.
Prices for bulk refined sugar are down about 10% from a year ago, while New York world raw sugar futures recently hit seven-year lows. Refined sugar prices are expected to hold near their 33c- to 35c-a-lb range for the foreseeable future.

While sugar prices have eased, corn sweetener prices for 2016 have soared. Corn refiners in early August issued pricing guidance informing customers of a $3.50 a cwt increase in 42% high-fructose corn syrup, liquid glucose and liquid dextrose, and a $4.50 a cwt increase in 55% HFCS and regular corn syrup, equal to about 15% increases from 2015 contracted levels. When initial offers
expired, prices were raised another $1.50 a cwt on all products, resulting in a total increase of about 20% from 2015.

Fearing a repeat of 2015’s tight supplies most users booked a majority of their 2016 needs before the second price increase went into effect in the latter half of August, making it the earliest contracting period in memory. Corn refiners refused to waver from list prices, putting buyers who waited or hoped to negotiate lower pricing at risk of higher prices or of being shut out. Refiners cited tight supplies and reduced production capacity. Lower corn prices had little if any bearing on higher corn sweetener offers, which will impact costs in 2016.

Cocoa powder prices were up more than 50% from a year ago, partly due to concerns about cocoa bean production in 2015-16. Cocoa bean futures were down from July highs but remain historically strong largely on speculative trading. Cocoa butter prices were up from March lows but down 25% from August 2014 highs. Lower-than-expected chocolate demand, especially in Asia, resulted in heavy cocoa butter supplies and reduced processing levels in some regions, which also reduced cocoa powder output and supported powder prices.

The most publicized surge in ingredient prices has been for eggs and egg products, many of which doubled and tripled in price to record levels this summer as an outbreak of H5N2 highly pathogenic avian influenza wiped out about 25% of the U.S. processing egg supply. Egg prices fluctuated widely this summer and currently are well off record highs set in June and August, but still are historically high. Whole egg and white prices also are off record highs, but are still historically strong, while yolk prices remain at record levels. Product values likely will remain so at least until the industry gets through the fall migratory bird season, which has the potential to bring A.I. back to the Midwest despite increased biosecurity procedures by producers. Even if A.I. bypasses U.S. flocks this fall, it will be about a year and a half before production returns to normal.

The impact of ingredient price swings on food manufacturers is illustrated in the Sosland ingredient indexes on Page 68. Values for the six food indexes are down from last year, as lower milk, sugar, cocoa butter, edible oil, dairy, apple and pork prices more than offset higher prices for cocoa powder and egg products, while bakery index values are mixed.