Solae sees opportunities for soy in rising input costs

By Chris Jones

- Last updated on GMT

Related tags: Cost, Soybean, Solae

Solae has said that ingredients companies will have to continue
their efforts to pass on rising input costs through 2008, but the
relatively lower increases in soy costs compared to other proteins
could provide a business opportunity.

Dan Camerer, Solae's vice president responsible for product line management, said today that it is still to early to say how quickly raw material cost increases could be passed on to consumers. But the company suggested that food price inflation was likely to continue through 2008, piling the pressure on companies to pass on any rises. Patrick Westhoff, co-director of the Food and Agriculture Policy Research Institute (FAPRI) at the University of Missouri-Columbia, told attendees at the same presentation that it could take until 2010 for "food price increases to return to normal levels​", although he said added that "no rapid increases are expected after 2008"​. But the increase in prices for other ingredients could, Camerer said, be of benefit to soy protein producers such as Solae. "We've seen soy protein isolate costs increase by around 16 per cent over the last year, but this is a lot less than the cost increases for other proteins." "Sodium caseinate costs, for example, have grown by around 85 per cent, so there is potential for food manufacturers to manage some of these cost increases by switching to lower cost proteins such as soy,"​ Camerer added. Both speakers stressed that it was hard for ingredients producers - who sit in the "middle of the value chain between farmers and food manufacturers"​ - to pass on costs, although Camerer confirmed that Solae had managed to pass on some of the rise in costs and is working hard to pass on more. One of the main problems is that rising commodity costs account for only around half the rise in total input costs, Westhoff said. "Farm incomes were around $300bn in 2007 but food expenditure was nearer $800bn,"​ he said. "Energy costs, labor costs and lower food harvests as a result of increasing pressure to produce crops for biofuels all contributed to this $500bn difference." ​ Demand for biofuels had affected corn the most, he said, but soy - the crop of interest to Solae - had also seen increases. Soybean oil is a potential ingredient in biodiesel, sales of which have grown dramatically in the last year, pushing up prices by more than 100 per cent over the last year, according to Solae. This, Westhoff said, was expected to increase as the US energy bill stipulated an ever-increasing mix of ethanol, made mainly from corn, and biodiesels, made from other crops, over the next ten years or more.

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