Dive Brief:
- As the prices of agricultural commodities drop, cost savings may increase for food companies, who purchase commodities to use in their products. Those food companies may also pass down a percentage of those savings onto consumers.
- Futures for food commodities decreased across the board. Some of the biggest drops came for sugar at 12%, wheat at 11%, and live cattle at 10%. Other major crops saw lower futures as well, including corn with a decrease of 5%, and soybeans were down 7%.
- These decreases inevitably help many food companies. According to research from Jonathan Feeney, a food and beverage industry expert with Athlos Research, Dean Foods saw its costs drop 28% year over year, and Hormel Foods saw a 21% costs decrease since last year.
Dive Insight:
Two presumed causes for the decrease in commodities futures are the strength of the dollar and the strong growing season for corn, which experts believe will keep the prices of commodities dropping for now.
Another likely cause is the falling price of oil, which is generally used by farmers for raw materials, tractor diesel, energy-based fertilizers, and pesticides. As commodities and costs continue to drop for food companies, the amount of savings that may be passed down to the consumer has made headlines as of late. But commodities only account for a fraction of the ingredients used in food companies' products, so those savings may not be as much as consumers might want.