Food industry: Gravy for corporates,        leftovers for consumers?

November 2023

Executive Summary

Thanksgiving special: higher turkey prices? Watch out for labor shortages. The consumer price index for poultry increased by +7% y/y in October while producer prices for turkeys decreased by almost -40%. Indeed, US farmers are charging less for turkeys as supply outpaced demand, despite the Thanksgiving spike. A tight labor market in the meatpacking industry explains this paradox.

Overall, agrifood commodity prices will remain higher and more volatile. The last three years have been a bumpy ride for agrifood commodity prices on the back of major disruptions. Though prices of some commodities have started to decline, we expect agrifood commodity prices to remain higher than they were in 2019 because of expensive fertilizers, a weaker dollar and intense financial speculation in the sector. We expect corn prices to stand at USD3.5 per bushel on average in 2024, soybean prices at USD12 per bushel, wheat prices at USD5 per bushel, sugar prices at USD0.25 per pound, cocoa prices at USD4,200 per ton and coffee prices at USD1.4 per pound.

As a result, consumers are actually cutting back on food… With food inflation outpacing headline inflation in both Europe and the US, food sales volumes have been declining. In Italy, volumes were down by close to -4.5% y/y in September 2023, while they decreased by -3% in France, -1.3% in the US and -0.8% in the UK. These declines are also partly because consumers are downgrading, giving up premium brands for cheaper value ones.

… While the food industry is setting the table for a significant margin recovery in 2024. Food companies in the downstream segment have been able to keep selling prices at current highs even as commodity, energy, and transportation costs have declined from 2022 peaks. Operating margins in the sector should hover around 14.7% in 2024 while they were at 11.6% on average in the past twelve months. Among packaged food companies, strong brands in staple food products with high pricing power could even show record operating margins above 17% in 2024 from 14.5% expected for this year. While the sector is resilient, risks include the looming debt refinancing wall in 2025 (13% of the sector’s total debt outstanding) for zombie companies, and rising insolvencies especially in the downstream segment.


Ano Kuhanathan

Allianz Trade

Maxime Lemerle 

Allianz Trade

Maria Latorre

Allianz Trade