UK food producers have outperformed the FTSE 100 so far this year but with the problem of rising commodity unlikely to be solved quickly, it may be tougher going from here on.

The recent recovery of the US dollar has admittedly given some relief and led to a drop in the price of basic agricultural commodities such as corn, wheat and soybeans since the end of June.

But the long-term threats to worldwide agricultural output that have caused prices of basic agricultural commodities to skyrocket worldwide since 2003 remain and any respite may prove to be temporary.

Issues such as climate change, soil depletion, increasing urbanization, the growing use of biofuels and rising prices for oil and fertilizer have all been factors. Consumers have already felt the impact, but producers are now also showing the strain as the ability to pass on higher input costs becomes more limited.

In the US, Pilgrim's Pride, the world's largest producer of processed chickens, announced earlier this month that it is cutting back production to boost profits, while the world's largest meat firm, Tyson Foods, closed a Kansas factory and cut 1,500 jobs to deal with food price inflation.

Texas-based Pilgrim’s Pride reported a pre-tax loss of $76.8m in the quarter to June 28, compared with profit of $100m the previous year. Revenue rose to $2.2bn from $2.1bn.

Tyson Foods posted sharply lower profits in the quarter to 28 June as increased feed costs pushed its chicken operations into losses. Operating profit for the period fell to $45m from $212m, as chicken operations posted losses of $44m compared with a profit of $95m over the same period a year ago.

But it’s not just US firms that are shedding job. Hovis bread owner Premier Foods has already shut down five out of the nine factories earmarked for closure with the loss of hundreds of jobs. The other four are set to go during the second half.

Meanwhile, 730 people lost their jobs at Northern Foods after the firm mothballed its Fenland Foods plant in Grantham after failing to agree a new contract with Marks & Spencer for the supply of ready meals. Northern said the decision reflects a strategy of only continuing with business where terms generate an adequate return for its shareholders. "We couldn't find a business model that was profitable for us,” Northern chief executive Stefan Barden told reporters.

Turning away business is not something firms do lightly, but it highlights the pressure across the sector. Analsyst say to expect more job cuts, but whatever firms do to cut costs, the next 12 months promises to be a major test.

• News Channel