Food maker ups prices as commodities soar

- Last updated on GMT

Related tags: Soybean

Signs that rising global commodity prices are starting to move
along the food chain to food makers and retailers were clear this
week when the frozen vegetable giant Birds Eye Foods announced a
rise in product prices across the board.

Citing the steep commodity rises, the US firm - with annual sales in the $1 billion range - said it would impose 5 to 7 per cent rises on all its products, including supermaket brands, starting from the end of next month.

"Our industry continues to be challenged by increases in agricultural commodity prices,"​ said Dennis M. Mullen, Birds Eye Foods CEO. "This is evidenced by the soybean and corn markets, as well as the dairy, beef and edible oils markets,"​ he added.

A shortage of global wheat, maize and soybean crops - compounded by the massive increase in demand from China - has seen raw material prices soar in recent months. Soybean prices reached 15 year highs and wheat stocks hit 30 year lows.

Ingredients companies have seen their margins squeezed as they delay passing the steep price rises for raw materials onto the market, but today there is little choice. The announcement from Birds Eye is a clear reflection of the price wave moving along the food chain.

And they are not the first. In the US, food giants Kraft and Hormel Foods have both indicated that they will be taking measures to deal with the commodity costs.

"We will continue in our efforts to mitigate rising costs,"​ continued Mullen, "but with no foreseeable commodity market improvements, we now find it necessary to take appropriate action."

Despite the soaring prices, last week the world's biggest oil processor Bunge reported​ a massive 75 per cent rise in income for the quarter. The US company said that risk management tools helped it the spread between the price for buying the soybeans and the price at which the derived products of soybean meal and oil were sold on.

"Our business model is positioned to deliver results when soybean prices are high, as they are now, and when they are low, as they were as recently as last year,"​said Alberto Weisser, CEO of Bunge.

Related topics: Market Trends

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