Report

The tide of rising ingredients costs could finally be turning for food manufacturers, according to Lee Linthicum, global head of food research at Euromonitor International.

After increasing steadily from mid-2010 to mid-2011, the price of food inputs on global agricultural commodities markets remained high for the duration of 2011, squeezing margins for packaged food manufacturers, including bakers. However, with global growth likely to be slowed by austerity cuts in most major economies and the eurozone debt crisis, Linthicum said the likelihood of food input price deflation on international agricultural commodities markets may increase in the short to medium term.

In March, the IMF food price index rose for the third month in a row, due to higher prices for cereals, some vegetable meals and palm and soy oils. Despite this, the IMF's March index also saw a near-6% decline on an annualised basis. The price of corn, wheat, sugar and cocoa in March 2012 were all well below prices seen in September 2011, said Euromonitor. Linthicum said: "Should annualised food input costs continue to fall, considerable savings all along the supply chain could benefit packaged food manufacturers/processors, retailers and consumers."

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