The US is experiencing the worst drought in decades with the
subsequent disastrous impact on grain production. The latest USDA Corn Crop
production report indicated production of 10.8 billion bushels a fall of 13% to
a 6 year low.
Wheat and Soyabean prices have also risen sharply in recent
weeks and the UN has warned that the drought in the US mid West will drive up
food prices reviving memories of 2008 when record prices sparked riots in
developing countries.
Livestock and milk related products will rise in accordance
with the higher costs of grain based feedstuffs.
Food manufactures are caught in a vice; the buying pattern
for many has been “just in time” reflecting the need to keep inventories as low
as possible. However without the safeguard of a “buffer stock” they are now
more than ever exposed to the harsh reality of having to “pay up” in order to
secure the raw materials to keep their facilities in production.
There also have the problem of the general economic
background with buyers seeking to delay payment, renegotiate contracts etc.
The order of the day is strict policing of each and every
element of operating costs, stock turn and the all important question of
receivables.
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