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On Food Price Highs and Commodity Peaks

It's an interesting time for the economy, especially in the food and drink industry
 On Food Price Highs and Commodity Peaks
 
 

The economy is a complicated thing, affecting every industry in its own way. At the moment, two big points of interest are at odds within the food and drink industry. On the one hand, analysts predict that commodity and transportation prices in the United States have peaked and are on the decline; on the other hand, other experts note that world food prices are reaching all-time highs.

Today the Wall Street Journal reported that world food prices in June rose ever closer to record highs, due in part to a sharp increase in sugar prices. Though grain prices dropped, the Food and Agriculture Organization (FAO) sugar index spiked 14 percent last month to a staggering 359. In all, world food prices are up 39 percent compared to this time last year.

 

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With that said, other reports speculate that the worst could be over. According to NRN, some analysts are observing a market that may be evening out. “It appears commodity prices have peaked, at least for the near term,” says market analyst Bart Glenn of D.A. Davidson & Co. “Although food inflation will remain an issue through 2012, it is encouraging that prices appear to be normalizing.” According to Glenn, staples like coffee, milk, corn and wheat are dropping in price – overall, the Producer Price Index states a 1.4 percent drop since May. Modestly dropping gas prices could also help restaurants save on costs.

Still, no one’s completely out of the woods just yet. Even with some food prices dropping and promise on the horizon, it’s clear that the reality of now is still record-high prices. Though Glenn warns restaurants about talking up any price increases to the media, it’s estimated that the decision of whether to raise prices is a bridge that many restaurants may have to cross in the near future. 



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