November 30, 2007

Grains prices may hike to 40 percent by 2020

Dutch investment firm ING group foresee that agricultural prices will jump by 40 percent by 2020 due to tight supply brought about by increased demand or changing weather patterns.

The hike will cause food and beverage managers to adjust logistics systems, pricing strategies, and product development to cope with the coming crisis. ING's analysts see opportunity for large companies that are better able to adjust and leverage the inflationary environment to their advantage.

The report also stated that "the virtuous inflationary cycle is created as leading consumer goods players translate higher input prices into accelerating sales in premium brands and developing markets."

Small and medium sized companies will have the most problems with input price pressure, while their positioning in regions and categories is focused too closely on western markets and products that depend on a supply of meat or grains.