The recent escalation of raw material, manufacturing, energy and packaging costs will result in an increase in price for soy protein ingredients, says the Solae company, as soybean prices hit 15 year highs and the firm passes rises onto the market.
Food makers and ingredients firms operating in today's markets are currently affected by the rising world price for basic food commodities. In each of the last four years world grain production has fallen short of consumption, forcing a drawdown of stocks for wheat, rice, corn and soybeans. Solae warned the market that the price hike in soy ingredients could rise by as much as 15 per cent.
"The mounting pressures have made a price increase unavoidable," said Jim McCarthy, senior vice president at Solae.
While the St. Louis based company, an alliance between US oil processor Bunge and DuPont, has absorbed pricing pressures in recent months, strong demand for the ingredients in parallel to a world shortage of soybeans will result in a 5 to 15 per cent rise in the soy protein product portfolio.
Severe droughts last year in the US - the largest producer of soy - have keenly impacted price. Soybeans have doubled in recent months from just over $5 per bushel to over $10 a bushel.
Rising demand from China has also contributed to the price rises, pulling on already reduced global soybean stocks.
"China has been driving the oilseed market for the last two to three years," Josh Dadd, an economist at the UK's grain industry body, the Home Grown Cereals Authority told FoodNavigator.com.
The Chinese $5.4 billion soybean purchase from international markets last year exceeded domestic production for the first time. China, once a major exporter of soybeans, produced only 16.2 million metric tons in 2003.
But the pull on stocks is not just from China. Ingredients companies supplying soy derived ingredients are enjoying a buoyant market as consumer demand for soy-based products keeps on rising in parallel to an increased awareness of the potential health benefits that soybeans, and their derivatives, can hold.
Market analysts The Freedonia Group predict that by 2007 US demand alone for soy products will rise by nearly five per cent each year to €6.7billion ($8.5 bn).
The price rises are not the first for Solae. In November last year the firm increased prices for its company's soy lecithin product line.
Industry observers predict that price relief for soy ingredients could be in sight as current high prices for soybeans will encourage more plantings around the world for the 2004-2005 marketing year. Soybean planting for the period are expected to reach 30.1 million hectares, up from last year's 29.7 million hectares because farmers are expecting strong prices to continue, the US Department of Agriculture said recently.