The impacts baking companies have experienced as the result of the recent recession and the turmoil and chaos in financial markets may be greater than that endured in any other similar economic setback, according to Sosland Publishing editor-in-chief Morton Sosland. He opined recently that as disastrous as the Great Depression was for the economy, one senses the repercussions of what occurred in the past several years are going to be longer lasting than anything preceding. Some grain-based food segments have benefited from this downturn because of their positioning or product lines. But on balance, the results have been negative. It is likely that grain-based food companies going forward will be quite different from the industry of the recent past.

Ominous words indeed, and ones that should be taken seriously. Last month’s capital spending report anticipated a breakout 2011. However, any glitch in the fragile recovery, if this year can be called such, threatens to prolong the difficult times we all are experiencing.

Mr. Sosland went on to state, “Hardly anything promises a more lasting effect than the tightening of credit … to the great majority of companies in grain-based foods.” For several years, bakers have held back on capital projects because of tightened budgets. Now, delayed projects are becoming “must” projects, and credit is not available.

“For the first time in the experience of most industry executives, obtaining financing for important and attractive capital projects has been nigh on to impossible,” Mr. Sosland said. “In many instances, major expansion programs deemed not just substantive, but worth doing, that in a different time would have seen suitors in pursuit of borrowers have encountered a final lender ‘no.’ Well-conceived expansion and acquisition programs have been brought to a halt as last-minute efforts to obtain financing fell short.

“It is in businesses like baking and other sectors of grain-based foods that the absence of funding has been especially troubling,” he continued. “Certainly, what has happened thus far has not advanced the national goal to speed job creation. Hardly any industry offers a better possibility of job creation through capital investing than does baking.”

Recent moves by the Federal Reserve can be interpreted as early signals of a shift in monetary policy. A House Committee on Financial Services meeting set for mid-February was postponed because of snow. Based on a Federal Open Market Committee statement, moves toward tightening the money supply and raising interest rates are not foreseen any time soon. However, Fed Chairman Ben Bernanke was expected to “outline his plans to “unwind the stimulus when the time comes,” according to FOMC.

For the baking industry, such steps offer little, if any, hope, according to Mr. Sosland. “While the past year of history-making fiscal stimulation offered no benefits to bakers wanting to borrow to improve their companies, steps that would make banks even more circumspect in their lending would be most troubling. As changes are made in financial policies launched in December 2008 that have had no benefit to baking, it is time to give attention how best to facilitate baking operations, which stand at the center of the national economy.” I couldn’t agree more.

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