Spending spree: Saved grain dollars should go into R&D

03-Dec-2013 - Last updated on 04-Dec-2013 at 09:38 GMT

Bakery manufacturers have lots of opportunities to invest in R&D in 2014 using savings made from lower wheat prices, says analyst

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Strong global wheat stocks and weaker prices have given bakers breathing space to innovate and manufacturers should continue investing in R&D in 2014 too, a commodities analyst says.

Global stocks have been healthier for several months and prices lower for the best part of the year and Francisco Redruello, senior food analyst at Euromonitor International, said this has led to increased innovation across the bakery sector.

“What we have seen is more innovation in terms of added value,” he told BakeryandSnacks.com.

Sectors like biscuits, pastries and breakfast cereal have seen most innovation, he said, with added fruit and nuts, vitamin enrichment and packaging as just a few examples.

“The strongest innovation we’ve seen is in biscuits. This is because they have higher margins and the market is not as mature as bread,” he said.

“If we keep this level of prices, we will continue to see this level of innovation.”

Redruello said that some bakery manufacturers want to keep the savings because they are under pressure from retailers, but noted that now is a great time to invest in challenging lines and product development.

“While others may make savings, it’s definitely an opportunity to go for adding value… Particularly for those categories not intense in cocoa and chocolate – ingredients that are becoming more expensive – there are lots of opportunities for investments because of the money saved on grain.”

Global wheat: Still not great but better…

Global wheat stock forecasts are projected to be 2.2m tons higher for 2013/14, according to the US Department of Agriculture’s (USDA) November World Agricultural Supply and Demand Estimates (WASDE) report.

“The global stocks for wheat are a big higher. Still, it’s not great,” Redruello said.

“I’m not saying wheat is not strong, but looking at consumption, it’s actually growing faster than the levels of stock… The key thing is that prices are fairly low and stocks are up but not massively up,” he said.

The Australian Department of Agriculture published its crop forecasts on December 3, indicating good prospects for the 2013/14 wheat harvest – up 17% to around 26.3m tons. This increased harvest will impact global stocks given Australia is the world’s third biggest wheat exporter after the US and Canada according to US Department of Agriculture (USDA) data.

“It’s true that the forecast is very, very strong but that’s because last year in August we had a very weak crop in Australia,” Redruello said.