Need for caution in expecting cost relief in 2012
Jan. 3, 2012
As great as the temptation may be for grain-based foods manufacturers to forecast that cost pressures from ingredients, labor, packaging and other elements may be less in 2012 than in the year now ending, it takes a big dose of bravado to express that viewpoint absent a great deal of caution. Coming off a year when searing cost escalations caught the most prescient unready, high-flying optimists about what may be achieved in 2012 realize how hopes swiftly change into bad dreams.
Even favorable weather patterns seem to be changing more quickly than ever before. Thus, recent welcome relief from terrible drought in the southern Plains, and the promise that offers for next year’s hard winter wheat crop, merit a highly cautious approach. Just how the banking and credit crises in America, Europe and Asia play out are sources of huge uncertainties not all that much different from the wide-ranging speculation about what is likely to happen in North Korea or the Middle East.
Sure, the global grain supply-demand situation, especially for wheat, promises much less stress in the year ahead than was experienced by every food company in 2011. As tough as that year proved for grain-based foods and food manufacturers as a whole, its legacy extends well beyond sharply rising costs weighing on margins. It is the year that underscored how important it is to pursue product pricing strategies recognizing cost pressures, no matter how sudden or unexpected they may be.