Milling & Baking News - September 9, 2008 - (Page 1)

THE NEWS WEEKLY OF GRAIN-BASED FOODS SEPTEMBER 9, 2008 / NEWS Bread dollar sales grow but unit volume under pressure T Baking relatively unscathed when Gustav weakens before making landfall Story on Page 14 LATE NEWS New generation soybeans approved for China ST. LOUIS - China 's regulatory regime has approved Roundup Ready 2 Yield for importation, Monsanto said last week. Monsanto said the soybeans, the first second-generation biotechnology soybeans approved for China, will be introduced on 1 million to 2 million acres for the 2009 season as part of a controlled commercial release, followed by a large-scale product launch of 5 million to 6 million acres scheduled for 2010. In addition to China, Roundup Ready 2 Yield soybeans are approved as safe for food and feed in the United States, Canada, Mexico, Taiwan, Japan, the Continued on Page 10 here was a time when an annual 4.1% gain in bread dollar sales would be greeted as great news within the U.S. baking industry. This isn't such a time. Scanner data from Information Resources, Inc. for the year ended July 13 showed bread sales across all channels at $6,464,613,000, up 4.1% from the year before. With baking ingredient costs up nearly doubledigit levels from the year before, bread prices rose sharply and sales volume was down. Unit sales were 3,076,199,000 during the 52-week period measured by I.R.I., down 4.2%. For the past four years, the bread industry has operated with Interstate Bakeries Corp. in bankruptcy. In the two most recent years, the industry has operated with the further challenge of the most volatile commodity price environment in a generation. Baking ingredient price pressures over the past two years have been extraordinary both in absolute terms and relative to the previous 15 years. Baking companies have been buffeted by mind numbing price volatility. For standard bakery flour, the late February peak price of $33.05 a cwt was more than triple, up 216% from the 2005 low price of $10.65 a cwt. Additionally, prices were moving so quickly, bakers had a difficult time establishing appropriate price increases for their customers, even when they were able to overcome retailer resistance to raising prices. Bread prices have moved steadily higher, as measured in the Consumer Continued on Page 25 I.B.C. says plan is close, but hurdles still remain KANSAS CITY - Even while admitting that "significant issues remain unresolved," Interstate Bakeries Corp. said in a Sept. 2 filing with the Securities and Exchange Commission that it is in the final stages of negotiating a plan of reorganization and related financing. "Recent negotiations have narrowed issues among parties with respect to terms of a plan of reorganization," I.B.C. said in a Sept. 2 S.E.C. filing. "As a result, our board of directors is hopeful that the required parties will reach agreement within the next few days, permitting our 2008 Form 10-K to be completed on a 'going concern' basis and filed by Sept. 15." The announcement comes a little more than two weeks after the International Brotherhood of Teamsters said it helped broker a deal that would allow the troubled baking company to emerge from bankruptcy. In the S.E.C. filing, I.B.C. said the potential plan would enable the company to emerge from Chapter 11 as a standalone entity rather than having to liquidate. I.B.C. has been operating under bankruptcy Continued on Page 11

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Milling & Baking News - September 9, 2008