Food Price Highs and Food Price Lows

Maintaining Profitability, Sustainability and Competitiveness in Food Manufacture

Food prices go up and down. They always have done. But when they hit major highs or major lows, it can cause food manufacturers serious problems.

This article looks at recent food price measurements and why pigging systems for the food industry are used by many companies in the sector.

Recent HighFAO Global Food Prices Graph

The Food and Agriculture Organisation of the United Nations (FAO) recently announced that food prices for global food commodities were at a fifteen month high. Comparing August 2016 with August 2015, they recorded a rise of nearly seven per cent. There was also a rise of around 1.9 per cent from July 2016 to August 2016. These rises are despite a decrease in the price of grain, and a predicted bumper cereal crop, which could also bring overall prices down. However, while the trend now shows food prices going up, they are still a long way from recovering from the steady downward trend of previous years.

Rising or Falling?

The FAO puts the rise predominantly down to increased cheese and palm oil prices. But while the FAO is stating food commodity price rises, here’s a contrast. According to the BRC Neilsen Shop Price Index, in August UK food prices saw their biggest fall on record. This index, which measures the price of food to the UK consumer, showed food prices reduced by over 1% in July. This follows falls of 0.8% in the previous two months.  Similarly, the United States Department of Agriculture Economic Research Service food-at-home (grocery store or supermarket food items) Consumer Price Index (CPI) for Food decreased for the third consecutive month in July. It is 1.6 per cent lower than the same time last year. This is the largest year-on-year decline since January 2010.

Comparable Measurements?

The FAO, BRC Nielson and CPI are by no means like for like measurements. While there are links, world food commodity prices are not the same thing as the price of food in the average UK shopping basket. Supermarket food prices are the result of competition between brands and subsequent promotional activity. They are also influenced by local and local price variations, taxes, regulations the impact of low grain prices and other factors.

Regional VariationsFood prices vary regionally

Food prices also vary regionally. For example, while the UK, US, Japan and Australasia have seen general food price deflation, prices in parts of these areas, such as New Zealand and Greece, as well as some African countries, are seeing price rises.

Managing Food Processing

So, whether prices are rising or falling, what can food manufacturers do to ensure their operations are efficient and profitable? The market also dictates that as well as being profitable, food manufacturers also need to ensure their operations are environmentally sustainable. A growing number of consumers, as well as the companies themselves are demanding this and sustainability is no longer confined to certain niche sectors.

Pigging Systems for Food and Beverage Companies

HPS specialises in pigging systems for food and beverage companies (if you’re not sure, here’s an overview of pigging and what pigging means). By recovering residual liquid or wet food product from process pipelines which manufacturers would otherwise treat as flush waste, pigging increases yields. It also speeds up processing, lowers the use of cleaning agents and water, and help towards environmental sustainability goals and objectives.

Waste Reduction

This amount of useable, saleable product recovered by pigging is significant. Hence the level of waste reduction is similarly large. This means major financial savings and decreased costs. The more expensive the product, the more there is to gain. If prices have fallen, it’s equally important to waste as little as possible to counteract the reduced value of inventory. In addition, HPS systems also speed up changeovers, reduce contamination risks and lower production, energy and disposal costs. In fact, there are a wide variety of benefits of pigging and product recovery systems.

Price Effects

Lower prices can hurt producers because they may have to sell more to maintain cash intake. On the other hand, lower prices can sometimes mean consumers are willing to buy larger quantities, or be willing to pay more for better quality product. On the flip side, higher prices can mean tighter margins. Each producer will have their own way of dealing with market and price fluctuations, however unpredictability and uncertainty are nearly always unwelcome.

FAO Food Price Figuresgrain prices have decreased

To measure food prices, the FAO use an index, This is based on five main categories: cereals, oilseeds, dairy products, meat and sugar.

The recent figures from the FAO show that the Vegetable Oil Price Index went up by 7.4 per cent. They put this down to lower output of palm oil from Malaysia than was expected, along with increased import demand from China, India and the EU. Sugar also rose to its highest level for nearly six years. This is largely because of the world’s biggest producer of sugar cane, Brazil, having a stronger currency. Brazil is also and limiting exports.

The biggest monthly rise, however, was that of dairy. This went up by 8.6 per cent over the month. There are two main reasons for this. Firstly, EU milk production is falling, and secondly Oceania is tightening its export supply prospects following a poor start to its dairy year.

While vegetable oil, diary and sugar prices rose, meat remained roughly stable, showing just a slight increase of 0.3 per cent from July.

Improving Food Manufacture

HPS has successfully implemented literally hundreds of pigging systems in food, chocolate and beverage manufacturing companies worldwide. These include many well-known names such as Kerry, Coca-Cola, Birds Eye, Masterfoods, Campbells, Britvic, Kraft, Heinz, Nestle, Unilever, and P&G, as well as numerous smaller organisations.

Contact HPS

For help or advice on improving efficiency of food manufacture by using product recovery and pigging products, please contact HPS. No matter what happens to food prices, our pigging systems will increase your sustainability, profitability, productivity and competitiveness.