Peter Margin. Photo / Martin Sykes
Food prices are likely to remain high for some time, but the enormous hikes consumers experienced over the past year are probably over, says Australasia's leading food manufacturer, Goodman Fielder.
Managing director and chief executive Peter Margin said that while prices would vary by category, the recent large
rises seen in products such as dairy were not likely to occur again in the near future.
"I think that there will probably be some moderation in food inflation.
"In the medium to long-term basis, I think there is an inevitability that food pricing will stay high."
Volatility, however, was likely to remain a feature in the medium term, said Margin, depending on what happened with commodity prices and the valuations for the Australian and New Zealand dollar.
Margin, who was in Auckland for a shareholder information meeting, cited soft oils as an example. While the price had come off by more than 30 per cent in US dollar terms over the past six months, the greenback had also appreciated by about 25 to 30 per cent at the same time.
"Whilst you're getting a decrease in commodities on the one hand, you're also getting some currency impacts that come through, so I think that volatility will continue."
Goodman Fielder, which positions itself as a low-cost manufacturer, has been hit hard by high commodity costs. Rapid increases in commodity prices have added an additional A$204 million ($226 million) to its costs.
It started contract manufacturing of its commercial fats and oils in China last week, allowing it to reduce conversion costs and avoid the need to supply finished goods from Australia to its growing Chinese customer base.
Margin said there were lessons to be learned from the Chinese milk powder crisis.
"What you've really got to focus on is making sure you've got good controls around any food processing operation in China.
"We've got our own quality-assurance people that will be giving us some positive assurance before anything goes out into the market."
As maker of some of the country's best-known brands such as Edmonds and Meadow Lea, Margin said the company could stand to benefit from the current economic turmoil.
"Where you're going into economic times of uncertainty, people tend to rely on brands that they grew up with."
