Dive Summary:
- In a new look at commodity prices and their effect on the food industry, a startling trend of extreme volatility has been unearthed, effecting everything from the production line to the consumer at home.
- Quickly rising grain prices, water shortages and third-world demand have fluctuated the prices of staple ingredient so much in the last ten years, that companies are beginning to design new products because of the uncertainty.
- A telling example would be the free fall of corn prices in 2008: $8 a bushel in June to $2.50 a bushel in December. Fluctuations like this are passed on to the consumer in price inflation and product shortages.
From the article:
Commodity prices have been volatile for more than a decade, creating new levels of inflation that have dramatically impacted budgeting and profit margins for food companies. No longer do we have the luxury of looking at commodity prices as a supply/demand exercise. Repercussions from factors that move commodity markets have forced food companies to change how they do business by either raising prices to what the market will bear or changing formulations. Food designers are caught in the middle, struggling to access competitively priced commodities that still meet their needs.
Without a doubt, achieving profitability is more challenging than ever before.
