Food commodity price falls spell good news for manufacturers
Published 11/10/2011 | 05:00
FOOD companies are set for a boost as food commodity prices start falling, spelling higher margins for manufacturers.
Data from the UN's Food and Agriculture Organisation tracking index shows that agriculture commodity prices fell by 2.2pc month on month in September and are now off 6pc from their peak last February. Prices are still up some 16pc year-on-year, however.
That fall-off in wholesale prices may not be passed on to consumers immediately, which would allow food companies to reclaim margins that had been hit since wholesale prices started rising more than a year ago.
The index is being led down by falls in cereals, which are now 7.5pc below this year's peak price. Dairy products are off 6.8pc so far this year while oils and fats fell 2.5pc on the month and have now slumped 14.7pc from their highest prices this year. Sugar has fallen nearly 10pc so far in 2011. It fell 3.8pc last month.
Davy Stockbrokers John O'Reilly said the decline in commodity prices would likely be reflected in better margins for the manufacturers from the first quarter of next year.
Earlier this month, prices fell at Fonterra's overnight global online auction for the eighth session in a row. Prices fell 1.6pc. At the previous auction, prices fell 2.2pc.