Volatility In the Food Supply

Articles
September 16, 2010

Volatility In the Food Supply

The Food Institute has been reporting on the sharp changes, mostly downward, in food prices this year but this week takes a look at the volatile supply of food products and what that means for manufacturers, retailers, and consumers.

The Food Institute has been reporting on the sharp changes, mostly downward, in food prices this year but this week takes a look at the volatile supply of food products and what that means for manufacturers, retailers, and consumers.

The Food Institute has been following the constantly changing market for food since 1928 and in looking back over thousands of reports, can safely say that trends in consumer demographics and consumer behavior can and do impact food prices and supplies over a period of time, but good ole Mother Nature has a much more powerful position and is not shy to invoke her power.

This is evident of course in natural disasters, such as the drought in the former Soviet Union that has decimated its wheat crop there, boosting prices and demand for wheat from the U.S. as stocks remain the second highest in more than a decade according to a Department of Agriculture report released last Friday. And despite all of the wide gyrations in prices a month ago, wheat prices are now expected to up only a percent from a year earlier.

Another food product that Mother Nature has greatly impacted has not received much attention beyond those directly involved, and is Alaskan Salmon. For several months up until just a few weeks ago, all predictions pointed to a very short catch of salmon this year, and of course higher prices.

At the beginning of the salmon season this year for example, all projections pointed to an extremely light catch of Pink salmon, which typically makes up about two-thirds of the overall catch, much of which goes into Canned Salmon. Indeed, it had been projected that only 69 million fish would be caught this year, down from 97 million a year earlier. And that was the way things trended, until early August. Well all of sudden noted Food Institute analyst Rob Kraly, the flood gates apparently opened and fish magically appeared. As a result, catch numbers through the end of August put the Pink Salmon catch at about 98 million – 42% more than the originally projected and even slightly more than a year ago with more fish to be caught.

So the Food Institute cautions its members and the industry overall not to become overconfident in the way food prices may appear to be headed, either up or down, because the forces of nature still have a big say in how much an of an agricultural product will or will not be produced each year.

And of course, don’t forget to turn to The Food Institute Report each week and the website www.foodinstitute.com when you need to know the latest on this front. For over 82 years, this trade association has been supplying the industry with this information in real time.