Market Watch

by | Dec 17, 2010

The price of corn has created quite a buzz lately among food suppliers and purchasers. At about $530/barrel, corn is up 60% year to year. Corn is a vital ingredient because it is used in everything from animal feed to most grocery items. This rise in price means that, with a delay, the price of standard grocery items such as milk and meat will also go up. In the immediate term, though, it is imperative for purchasing managers to follow this trend so that, if the price of corn goes to high, alternative options can be generated.

At Prime Source, we deal with issues like this all the time. For example, in March of this year, our dietary team noticed that the price of a 50lb bag of fresh onions went from an average of $13 up to $21. As March wore on, the price kept ticking up into the high $20s. By mid-April, the price was up to $46, nearly three times its typical average. Clearly, this hike called for some purchasing management intervention. The Prime Source dietary team began consulting with our clients’ food service directors to see which menu items could be substituted with frozen onions. At the time, frozen onions averaged about $9.20 per bag, a remarkably cheaper price than fresh onions. Of course, frozen onions are not an exact substitute for fresh onions because they cannot be used in salads and some dishes but they are great for soups and many dishes that can be preserved. Additionally, the frozen onions were pre-chopped which cut down on food prep time. These decisions saved our clients a significant amount of of money. Interestingly, the current situation is reversed. Frozen onions are now at $23 and fresh onions are at $14. In this scenario, it’s worth it to buy the fresh and spend time cutting them because frozen is simply too expensive.

As the price of corn continues to rise, the Prime Source dietary team will be communicating with food service directors to properly grapple with this issue and keep our clients on budget.

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