COMMODITIES REPORT: What do the changing economic times mean to restaurant owners?

Intro by Tom Boyles

With the volatility of financial markets, exchange rates, agriculture and so many other changes taking place in the world, PMQ has become as concerned as many restaurant owners. These changes are causing many people to lose a lot of sleep wondering what will happen in 2009. We talked to several key people in the restaurant industry and have recruited Mitch Ireaci of Campoli Foods to help give some answers and a general overview of what you can expect. Mitch is not the only expert we have included in this issue to tackle this subject. Look through the articles of our other contributors for advice, forcasts and projections. If you have further questions, email us at tom@pmqaustralia.com and we will address these questions in the next issue of PMQ’s Pizza Australia.

Report By Mitch Ireaci
Head Buyer, Campoli Foods

Overview
We thought it would be good to give the readers an overview of where we think ingredients are heading in the short and medium term. We talk to commodity and ingredient suppliers on a daily basis and think that we should share these insights with the wider market and the final customers for these products, you the pizza shop owners and operators.

Currency Exchange Rates
The volatility of the Australian dollar with movements of over 5 cents in one day is causing importers great uncertainty. All products, such as tomato, olives, oils, pineapple and deli products are being forced upwards on an almost weekly basis with the Australian dollar falling from its highs of close to parity mid year with the greenback to a volatile range between US$0.59 to US$0.67 as of early Dec. 2008. All importers of foreign origin products will face these currency related pressures and must pass them on to the end user.

Pineapple and Tomatoes
On top of currency pressures we see supply issues with several important product groups. Pineapple, particularly product from Thailand, is in limited supply and prices have moved up considerably over the later part of 2008. Water supply issues that are leading to average/poor tomato crops in the US, Turkey, Australia and China is also causing concern and the need to look to less traditional supply countries. Meat pricing, particularly pork and chicken, has moved up over the year, but hopefully a moderating grain price will see these products stabilize into the New Year.

Dairy
Domestic origin products such as cheese and flour are also under pricing pressure from the falling Australian dollar. Dairy producers are pushing for a higher return on domestic supply against a rising return in Australian dollars on their export sales. However the supply situation seems to be back in balance compared to the lack of domestic supply at the end of 2007 and we will have no problems with supply in 2009.

Wheat and Flour
The initial rain at the beginning of the wheat season gave a promising start to what looked like a long awaited above average crop. Lack of follow up rain however has decreased expectations of much of the crop in Western NSW and Victoria. The wheat crop for this season is looking at perhaps 19.9 M tonnes compared to a drought reduced 13.1 M tonnes in 2007. Flour pricing based on predicted tonnages is uncertain but we are hoping for minimal increases and perhaps even a small decrease as the futures export pricing of wheat is trending down. All in all, we are in a very volatile period in terms of pricing and supply across all ingredient categories. Until the Australian dollar attains a level of stability importers are facing great uncertainty on pricing. Supply in particular categories is also an issue. We see this volatility and up ward pressure continuing in the short to medium term. Hopefully if the dollar settles on the long term average of around US$0.65 -US$0.72 we can see some more stability come back into the market.