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Caravan price hikes blamed on rising commodity costs

By Sarah Hills , 01-Aug-2008

Caravan Ingredients is the latest company to announce price increases due to rising raw material costs, which in some cases have surged by as much as 300 percent in a matter of months.

The manufacturer and supplier of bakery and food ingredients said it was forced to push prices up because of hefty increases in commodities including soybean oil and wheat over the last year.

In particular it said that ascorbic acid, a popular oxidizer in bread manufacturing, has increased approximately 300 percent in just seven or eight months.

Ian Trood, vice president sales at Caravan Ingredients, told FoodNavigator-USA.com: “Caravan Ingredients has a wide range of products which include a mix of blended as well as manufactured goods. Significant cost increases have been seen among all ingredients used in Caravan products.

“These increases are driven by the rising cost of commodities such as soybean oil, palm oil, lard, stearic acid and vitamins, to name a few.”

He added that ascorbic acid, or vitamin C, is extremely important in the manufacturing of bread. It strengthens dough and handling. It also improves gas retention, grain and texture and volume. These characteristics are important to the overall appearance of bread, making it more palatable and ultimately viewed as better tasting. Ascorbic acid is also important in frozen dough.

The company said the price increases will be across all product lines and may vary dramatically. They will become effective from September and because of volatility in the commodity market, it is “unlikely” to hold the prices for more than three months.

Trood said: “Soybean oil is up 68 percent from one year ago, as well as stearic acid. Vitamins, lard and palm oil are not far behind with increases of 63 percent, 50 percent and 40 percent respectively. Wheat is up 28 percent and corn based products are up approximately 11 percent.

“We have carefully reviewed our options and in order to maintain our level of quality, it is necessary to increase prices.

“Caravan Ingredients understands that price increases are difficult to absorb. We are continually striving to improve our efficiency in order to reduce the impact of rising costs.”

In addition, many ingredients are purchased outside the United States and due to the declining US dollar, Caravan said the cost in US funds has increased.

Ascorbic acid

Due to many changes in market prices recently, value data for ascorbic acid is difficult to collate according to a recent report from Leatherhead Food International on global trends and developments in the food additives market. In 2007 prices were reported to be around $4.50 per kg. However, there had been a dramatic fall since the mid-1990s from $13-16 per kg after the arrival of Chinese suppliers in this market.

It is estimated that the total world market for ascorbic acid equates to around 85-90,000 tonnes. Of this, use as an additive in food and drinks amounts to 35-40,000 tonnes. Leatherhead said that food and drink is the second most important application for vitamin C and dietry supplements have the largest end use.

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