As bad grain harvests around the world send animal feed prices soaring, food manufacturers and cosmetics suppliers are facing higher prices for gelatine.
Gelatine is widely used as a thickening agent and to add texture to foods such as confectionery, ice creams, jams and yoghurts, as well as health and beauty products. It is mostly produced as a by-product of the meat and leather industries, and the majority of edible gelatine is derived from pig skins and cattle hide and bones.
Higher feed prices are now prompting fears there will soon be fewer animals from which gelatine can be obtained, as under-pressure farmers reduce herd sizes in response to soaring input costs. Already, a shortage of pigskin and animal bone - coupled with rising global demand for leather - is putting increasing pressure on worldwide gelatine supplies, leading some gelatine factories to close due to a lack of raw material.
Grain reassurance: Ukraine has reassured markets that it will not impose export restrictions on grains. Farmers have already exported about 6.6 million tonnes, and it has been decided wheat exports could go up from four to five million tonnes.
Veg oil demand up: Global vegetable oil stocks have reached a 38-year low this year, and growing demand for food and biofuel will increase demand by a further 23 million tonnes by 2016, according to a Rabobank report.
Wheat prices rise: Wheat prices have risen again following drought concerns in the US and Australia. Just 36% of US winter wheat had emerged this week - down from the usual average of 44% - and the USDA has cut its expectations for global wheat production because of dry weather in Australia.
Tea production down: Poor weather has caused tea production in Assam and West Bengal to fall about 10% in the first nine months of the year, according to the Indian Tea Association.
To add further pressure, the gelatine industry is highly consolidated following a number of mergers in recent years, meaning the market is dominated by a very small number of multinational players with a considerable grip on supplies - and prices. In addition, higher production standards in China - which came in at the start of 2012 - have pushed up prices.
As a result, Chinese gelatine prices - which are indicative of global levels -reached $5,300/tonne in August, up 16% from August 2011 and 42% higher than in August 2010.
Manufacturers can opt for a range of alternatives to gelatine, such as agar, but few - if any - offer the same versatility as gelatine, meaning it remains very much in demand as a key ingredient. As a result, gelatine prices are likely to continue to move in only one direction over the coming months - up.