Food prices slowly following ingredient values higher
by Ron Sterk
KANSAS CITY — The cost of a “classic” Thanksgiving dinner for 10 rose 1.3% from 2009, but it was 2.6% below the 2008 record high, reminiscent of ingredient prices overall, many of which have risen sharply in recent months but remain well below 2008 levels when most commodities set record highs.
The dinner survey, conducted annually since 1986 by the American Farm Bureau Federation, closely tracked the group’s 2010 quarterly market basket food surveys and the Commodity Price Index, the AFBF said. It indicated higher prices this year for milk, cream, rolls, carrots, celery, pumpkin pie mix, pie shells and sweet potatoes. In addition, the survey’s “miscellaneous” category, which lumps together several items needed to complete the dinner such as eggs, sugar, flour, butter and coffee was up 29% from a year ago, the largest increase of all the items included in this year’s survey.
On a broader scale, a comparison of current commodity and ingredient prices with those of 2008 may indicate food prices are heading higher, although somewhat held in check by the slow economic recovery.
On a global basis, the United Nation’s Food and Agriculture Organization in its latest Food Outlook Report warned of “harder times ahead” unless production of major food crops increases in 2011.
“International prices could rise even more if production next year does not increase significantly — especially in maize, soybean and wheat,” the FAO said. The organization noted, though, that rice reserves were expected to increase 6% next year, and the US Department of Agriculture earlier in November forecast record high US and global rice production in 2010-11.
Domestically, the Bureau of Labor Statistics said last week the October CPI for food and beverages rose 0.1% from September and was up 1.4% for the past 12 months. The index for dairy and related products, up 1.1% from September, showed the sharpest increase in the food sector. But the index for cereals and bakery products fell 0.5% from September.
Significant volatility this year, mainly in futures prices but also in some cash-only ingredients, also is reminiscent of markets in 2008. A dramatic example is breaking stock eggs, which moved from the year’s low of 30 cents a dozen in mid-October to two-year highs of 75 cents a dozen in mid-November as producers reduced flocks, put laying hens into forced molt and in some cases held eggs off the market to get profit margins out of the red as feed costs increased. The price increase of 2.5 times from the low in just 30 days compared with a high of $1.20 a dozen in March 2008, which rose 2.6 times from the prior low but over a nine-month period.
Soybean oil, the most widely-used vegetable shortening, hit a 27-month high of 49 cents a pound in mid-November, but was well short of the record 65¼ cents a pound in June 2008. Still, the current cash price was well above values that ranged mostly from 27 cents to 35 cents a pounds from October 2008 to mid-2010.
Solae, LLC, St. Louis, last week announced a 7% to 9% global price increase for its soy ingredients, citing, in part, increases in the global producer price index and rising demand for protein.
“Like all food companies, Solae has been affected by general inflationary pressure in the current economic environment,” the company said.
Nearby soybean futures prices topped $13 a bushel two weeks ago, well below highs above $16 a bushel in early July 2008. A major difference this year is prices are soaring largely on unprecedented export demand despite record large US soybean production while in 2008 the runup was mostly the result of production problems.
Although futures prices for the major commodities were well off highs set in early November for corn and soybeans and in early August for wheat, they remained about 10% to 20% above year earlier levels.