Food Prices Poised to Increase

This summer’s lingering drought—the worst in at least 50 years, with over 1,000 counties in 26 states currently qualifying for disaster relief—will inevitably cause a spike in food prices. As reported by The Wall Street Journal, corn is now 22% more expensive than at the beginning of the year, and soybeans are up 32% (see in “For Food, It’s the Bad and the Ugly”).
The World Bank also reports that wheat prices have spiked considerably—up 50% since mid-June (see “Food Price Volatility a Growing Concern, World Bank Stands Ready to Respond”).

After a period of high food prices, consumers initially got a bit of a break this year. And as the WSJ article notes, consumers haven’t yet felt the effects of this summer’s drought-induced price hike—but they will soon, first in meat prices, with packaged and processed foods taking a hit in 10 months to a year (see WSJ, MarketWatch, “Why the Fed Will Look Past Rising Food Prices”). Once that impact hits and major food manufacturers are subsequently forced to raise prices, analysts predict consumers will reduce total food expenditures while taking a renewed look at private-label products. Reduced overall spending could impact the overall economy, forcing the Federal Reserve to potentially take stimulation measures it when it meets tomorrow and Wednesday; some analysts feel that the current commodity situation will not factor into the Fed’s current thinking.
The World Bank has voiced its concern about this situation—and particularly how it might potentially impact the world’s economically disadvantaged population.

“When food prices rise sharply, families cope by pulling their kids out of school and eating cheaper, less-nutritious food, which can have catastrophic, lifelong effects on the social, physical and mental well-being of millions of young people,” said Jim Yong Kim, group president, World Bank. “The World Bank and our partners are monitoring this situation closely so we can help governments put policies in place to help people better cope.

“In the short term,” continued Kim, “measures such as school feeding programs, conditional cash transfers, and food-for-work programs can help to ease pressure on the poor. In the medium to long term, the world needs strong and stable policies and sustained investments in agriculture in poor countries. We cannot allow short-term food price spikes to have damaging long-term consequences for the world’s most poor and vulnerable.”

The World Bank reports that the impact of the U.S. drought on global markets has been exacerbated by weather-related conditions in other countries that have affected production, where a “feast or famine” polarity has emerged. Like the United States, wheat crops in Russia, Ukraine and Kazakhstan have been hit hard by a lack of rain. Europe has the opposite problem, where persistent rain is causing problems with the wheat crop. In India, monsoon rainfall is about 20% below the long-term annual average.

‘Cool Food for Kids’ Encourages Healthy Lifestyles

The National Frozen & Refrigerated Foods Association (NFRA) is gearing up for its annual Cool Foods For Kids promotion to educate millions of children and families about the many nutritious and convenient frozen and refrigerated food options. The educational outreach program takes place in October and encourages healthy lifestyles through responsible, balanced food choices, appropriate portion control, increased daily physical activity and more quality, family mealtime.

Educational curriculum specialists, Young Minds Inspired (YMI), have designed the Cool Food for Kids program and will distribute specialized curriculum materials emphasizing good nutrition and physical exercise to more than 20,000 schools nationwide. Teachers are given a lesson plan with several activities and an educational poster to get kids excited about planning healthy meals and active hobbies for their entire family.

The program will extend into the retail sector, attracting consumers with point-of-sale materials provided by NFRA and merchandising that showcases the complimentary elements of the campaign. Promotional highlights include a Ski or Sea Family Vacation Sweepstakes, the online Cool Food for Kids Café featuring kid-friendly recipes and games, Easy Home Meals on Facebook and Twitter and more. NFRA spokesperson, Mr. Food, will also be supporting the Cool Food for Kids healthy lifestyle messaging and will devote an entire show to the promotion in October.

The October Cool Food for Kids educational initiative is enhanced through NFRA’s partnership with the Healthy Weight Commitment Foundation (HWCF), a coalition of organizations fighting the growing obesity problem in America.

Doughnuts: the new cupcakes

The latest food craze sweeping the city is hitting the sweet spot. While cupcakes and macarons satisfy after-dinner cravings, bakers are discovering that the doughnut—a treat good from morning till night—can provide the most profit.

"I know people think it's just breakfast, but our business is throughout the whole day," said Mark Israel, owner of Doughnut Plant, which has a recently expanded headquarters on the Lower East Side, as well as a 17-month-old outpost in Chelsea and, coming soon, a site in the Grand Central Terminal neighborhood.

But these doughnuts are more sophisticated concoctions than the garden-variety glazed or cruller. They sell for up to $3.25 a pop. They come in a variety of shapes and exotic flavors, such as pistachio-encrusted with lemon curd or square peanut butter filled with banana cream. Local or organic ingredients are typically touted.

Bakers like Doughnut Plant, as well as Dough in Brooklyn's Bedford-Stuyvesant neighborhood, aren't the only ones taking advantage of the surge in popularity. So too are restaurants, such as Pies 'n' Thighs in Williamsburg, Brooklyn, and the Brindle Room in the East Village, which are boosting their breakfast business by piling on the fried dough.

"We saw we were selling out of all these flavors and realized there's a hole we can fill—no pun intended," said Sarah Sanneh, co-owner of Pies 'n' Thighs, a popular spot also known for its chicken biscuit sandwiches. "We just let our imaginations run wild."

The cost of making a doughnut is relatively low compared with other sweets—and profits are high. Experts say the core ingredients—mostly flour, water, sugar and salt—are relatively cheap, and production doesn't require a lot of heavy-duty equipment or skilled labor, leading to profits of 15% to 30% per doughnut. "They're not expensive to make and not hard to learn how to make; they can be created in great quantities; they have every opportunity to be a success," said Stephen Zagor, director of culinary management at the Institute of Culinary Education.

Of course, doughnut fads have cooled in the past. A decade ago, Krispy Kreme made headlines for its rapid expansion—and subsequent collapse as customers grew tired of its gooey wares. At one time, Krispy had nine Big Apple stores. Today it boasts only one.

Even Dunkin' Donuts, the largest New York City chain store, with 466 locations in the five boroughs, did not add any outposts last year after opening 37 in 2010, according to a study of local franchising trends by the Center for an Urban Future.

U.S. No. 1 Cheese Producer

The global cheese manufacturing sector is estimated to reach $55.3 billion in 2012, with the United States leading the market as the world's single-largest cheese producer, according to market researcher IBISWorld.
"The industry has benefited from robust global economic growth for much of the past five years, rising demand from the newly affluent economies of Southeast Asia and Latin America and clever product innovation," said IBISWorld industry analyst Naren Sivasailam. "This has been combined with falling supplies from dairy powerhouses, such as New Zealand and Australia, due to adverse climatic conditions and high feed costs."

The United States is the world's single largest cheese producer, followed by Germany, France and Italy. In the developing markets of India and China, cheese consumption has grown at a mid- to high double-digit rate due to increased urbanization, Westernized diets and rising incomes.

The global cheese manufacturing industry is characterized by a diverse range of participants, ranging from multinational giants as Kraft Foods and Fonterra to smaller dairy cooperatives and niche and artisanal producers. In the developed markets of Europe, North America and Australia, cheese production is largely a mature and saturated industry with limited growth opportunities for domestic manufacturers. The European market, for example, is highly fragmented with many small producers servicing niche domestic markets. In North America and Australia, the market is more concentrated with large multinationals and dairy cooperatives that produce the majority of the domestic cheese.

Over the next five years, industry prospects are expected to be relatively bright, driven largely by the forecast economic recovery, stability in dairy product prices and a resurgence in demand from the developing world. Product innovation in the form of functional and health-based cheese products is expected to generate renewed interest in the mature markets of North America, Oceania and the European Union.