Food Business News - January 4, 2022 - 18

MARKET INSIGHT
©EIGHTSHOT STUDIO - STOCK.ADOBE.COM
High ingredient, service prices
likely to persist in 2022
Input costs, logistics, weather, demand seen driving prices
CONTINUED FROM PAGE 1
quickly, and there are many extenuating
circumstances in the global marketplace
over which a single part of the market has
little if any control.
While the government is debating
and pouring money at logistics and other
critical areas, the best hope is market
participants (such as food manufacturers,
farmers, carriers and shippers using their
services) will begin to identify solutions.
The pandemic has brought about
some changes that likely will be good for
industry and for consumers, even if they
may be painful in the interim. Food companies
(and other industries) have realized
that " just-in-time " delivery (which in
effect shifts inventory costs to suppliers)
may be problematic amid logistics snarls.
Changing inventory practices will be
expensive, but necessary, and in the short
term is adding to ingredient or packaging
shortages as well as to logistics demand
as manufacturers are seeking to buy more
earlier than they immediately need. In the
longer term, that should work itself out.
But most in the industry forecast little if
any relief in logistics for at least the first
half of 2022, which will cast a cloud over
nearly every aspect of agriculture and
food processing.
Another change has been a difficult
and expensive shift to sourcing more
18
Food Business News
ingredients and materials locally or at
least from nearer countries like Canada
or Mexico rather than from China. While
the " shop local " trend isn't new (especially
from a consumer perspective), it has taken
Pasta index
140
230
320
410
500
Jan.
2021
bakery ingredient indexes, which are
calculated ingredient costs of certain food
items using standard industry formulas
and prices gathered by Sosland markets
editors, give a good overview of the impact
on prices for some specific items and
bear close watching in 2022. (The indexes
appear on the last page of the Ingredient
Markets section.)
The index with the largest gain by far
March
Source: Milling & Baking News
May
July
Sept.
Nov.
on greater meaning during the pandemic.
Sourcing local reduces freight costs, shortens
delivery times and supports domestic
industry along with other benefits. Unfortunately,
many items and ingredients as of
now are not available domestically. Most
people would be amazed at how many,
often critical, ingredients and materials
are available only from China.
Sosland Publishing Co.'s food and
this year was for pasta, which in mid-December
was up 140% from a year earlier.
The huge increase reflected multi-year
low durum crops in the United States
and Canada. Except for the pork sausage
index, increases from a year earlier for
the other food and bakery indexes ranged
from about 13% to 67% in 2021, reflecting
widespread increases in ingredient prices.
How much prices will moderate in
2022, if at all, depends significantly on
weather in the world's major grain and oilseed
growing regions, consumer demand,
materials prices and availability, labor
costs and logistics rates and timeliness,
among others.
One thing that most analysts agree
on is that markets are poised for greater
volatility in 2022, whether trending higher
or lower. FBN
Ron Sterk
rsterk@sosland.com
January 4, 2022
Food Business News - January 4, 2022

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