Commodity & Currency Update
As has been widely publicised, the World price for sugar has reached 28 year highs towards the end of August. After climbing for some months. The reasons behind this are due to poor harvests in Brazil due to droughts and also the growing use of sugar cane in Bio-fuel production. Also in India the monsoons have negatively impacted on sugar production due to low sucrose levels in cane and this is resulting in severely reduced world production versus a growing world demand. Fears of a sugar shortage and increased prices in the EU is unfounded as the Sugar Regime still protects the EU markets from price volatility. For EU producers though, surplus production can be exported and achieve healthy price levels. The Regime is being dismantled and the next step takes effect from 1 st October when the guaranteed minimum sugar price is cut to Euro404.4 per tonne and also import tariffs are removed for sugar from ACP and less developed countries. EU sugar production has been under a quota system which has been reduced now to 14m tonnes, down from 20million.
Over recent months Dairy prices have been stable and at low levels. However this situation is changing as we speak as due to a drop in Cheese production throughout the EU, Whey Powder has become less readily available which has forced up prices over the last two months. Whey availability is expected to continue to be tight going forward.
Skimmed Milk Powder prices have also started to increase over the last 3 weeks or so as availability in the EU tightens. This is partly due to producers selling surplus production into Intervention as the free market premium has been only around £10-20 for some months. This Intervention stock will eventually go for Animal Feed use. Also as the world demand for SMP has been strong, it has been attractive for EU manufacturers to export and the result of these two factors has now led to shortages in the EU which has now pushed prices to a level about £150 above Intervention. So please expect Milk Powder prices to increase as we go into 2010.
Cocoa prices remain at very high levels. Seemingly a very influential ‘cocoa guru' is saying in essence, that although production volumes are slightly behind demand (grindings), the small deficit is not the key issue, it is the actual quality of the beans that is causing concern and driving the market at the current high levels. Our view is that the high levels seen at the moment are not reflecting the actual physical reality and that the market is skewed through sentiment. Also as Industry is believed to have relatively short cover this also supports the market staying high.
Also there remains high world stocks of Cocoa Butter (and so ratios are very low at the moment) but the flip side to this is that Cocoa powder prices are high and Industry forecasts support the view that these strong levels will be with us for a couple of years maybe. We have heard of large Industrial buyers covering forward volumes into 2010 at levels towards £2000 so this supports the view of continuing high prices.
So to have the opinion that the market will ease back down is doomed to failure or ridicule, but I will stick with it – and inevitably one day will be proved correct! I strongly feel that the market will fall back in the coming weeks.
Sterling dropped during August from a high of around Euro1.18 to a low of 1.13, which confounded a lot of commentators who were confidently forecasting hitting the 1.20 level. Mixed UK, EU and World economic news and forecasts all had a negative impact on sterling and this volatility seems likely to be with us going forward to the end of the year.
Fuel prices have been increasing and with the additional 2p per litre from 1 st September, the costs of Distribution become higher and have to be passed on to the end consumer. With raw material prices moving upwards and weak/volatile sterling will create upward pressure on food prices going through the autumn and winter.
3 rd September 2009
Honeycomb Large Pieces 2.5kilo cases.
These are large pieces of honeycomb, up to 3cm cubes, clean label – Sugar, Glucose, Bicarbonate of Soda and Wheat Flour.
Ideal for high quality Ice Cream makers as an inclusion and of course great for Chocolatiers to dip/coat in chocolate – put in a nice ribboned bag, a great one for ‘Crunchie' lovers everywhere!
VAT applies to this product.