Ingredient cost decline welcome relief in tough year

by Josh Sosland
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Given the many difficulties that face baking as 2011 ends, one incredibly positive development merits note — the steep decline in costs for many key bakery inputs.

Wheat futures prices in Kansas City have fallen by a third from the highs reached in February (within 10c of $10 a bu at their peak), and markets are down 21% from a year ago. Similar declines have been sustained in Chicago and Minneapolis, though the latter market has been a bit of a laggard.

Trends for other ingredients have been weak as well, including soybean oil and cocoa. The bellwether corn market also has been on the defensive, sliding 27% from its high of just under $8 a bu. Some markets have been slower to retreat, including sugar, and energy prices have frustratingly stayed near their highs as well.

As has been noted in the past, declines such as have been experienced in flour markets create new risks as well, with quotes remaining well above historical averages but still far beneath highs. Ingredient buyers face significant exposure on both the upside and the down. Additionally, many bakers and other food companies are working off contracts made at prices well above current spot quotes.

Still, as current contracts unwind, buyers will be taking advantage of the most attractive buying opportunities in well over a year, a highly welcome respite from prior pressures.

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