Very large individual buyers for commercial food preparation have become common. These buyers typically are not content with generic bulk commodities from the spot markets but insist on special specifications or services. The growing importance of such buyers has had the side effect of diminishing the amount available for trading in the traditional price discovery markets. Some of the recent price volatility may be attributable to the probably irreversible trend toward thin spot markets. The emergence of a large food preparation industry has lengthened the time between price changes and full response to those changes.
Food processors incur substantial cost to reformulate products and change labels.
They also tend to be cautious about introducing product changes that may affect flavor or consumer acceptance and to cushion the immediate effect of changes in ingredient costs on prices of their products. Retail consumers also may be responding more slowly to price changes. For most consumers, purchase of basic foodstuffs now requires an extremely small share of their income. They probably are less aware of price changes and have no compelling reason to alter purchases quickly. The record wholesale prices of the second half of 1998 did not produce any significant immediate response in product movement.