High Wheat Prices Raise Grocery Costs

Associated Press ^ | Saturday March 15, 4:46 am ET | Betsy Blaney, Associated Press

[BenLurkin]

LUBBOCK, Texas (AP) -- If you think the cost of gassing up your car is outrageous, wait until you need to restock your pantry. The price of wheat has more than tripled during the past 10 months, making Americans' daily bread -- and bagels and pizza and pasta -- feel a little like luxury items. And baked goods aren't the only ones getting more expensive: Experts expect some 80 percent of grocery prices will spike, too, and could remain steep for years because wheat and other grains are used to feed cattle, poultry and dairy cows.

"It's going to affect everything ... impact on every section of the grocery store," said Michael Bittel, senior vice president of King Arthur Flour Co. in Norwich, Vt.

Consumers such as Maria Cardena feel trapped by the prices. She said the bread she buys has jumped from 69 cents a loaf to $1.09 in recent weeks.

"You have to buy it," said the 29-year-old mother from Lubbock, Texas. "You can't go without it. Everything has gone up."

The wheat market has been pushed higher by a combination of agricultural, financial and energy issues.

Poor wheat harvests in Australia and parts of Europe and the U.S. have caused China and other Asian countries to buy up more American crops, which are especially attractive because of the weak U.S. dollar.

At the same time, the American crop is shrinking because of federal incentives to grow corn for ethanol. And skyrocketing gas prices make it costlier to get any wheat to market. Those same pressures have also made it more expensive to supply feed grains for livestock.

At Bob's Red Mill flour company, wheat flour has typically been subject to retail price adjustments every five years. Now those increases are happening almost monthly.

"You look at the price and you say, 'Oh, my gosh,'" said Dennis Gilliam, executive vice president of sales and marketing for the company in Milwaukie, Ore. "It keeps climbing every day."

Wheat historically trades at $3 to $7 a bushel.

But this week, futures of spring wheat -- which produces the flour used in hearth breads, rolls, croissants, bagels and pizza crust -- were close to $18 a bushel on the Minneapolis Grain Exchange. They climbed as high as $24 in late February.

Consumers pay an additional penny on wheat products for each dollar the price-per-bushel increases. "It's a huge impact," said Steve Mercer, spokesman for U.S. Wheat Associates, an industry group.

White bread cost an average of 85 cents a pound in 1998 and $1.03 in February 2006. The price rose to $1.32 a pound last month, according to federal data.

And that's on top of overall food price increases of 4 percent last year and an additional 3.5 to 4.5 percent expected this year, according to federal data. Most years see 2.5 percent increases.

During the past few months, the price of cereals and baked goods has risen nearly 6 percent over the same time last year, federal officials reported.

Consumers can try to minimize costs by buying fewer wheat products, but the nation's bakers, pizzerias and other flour-dependent industries don't have that luxury.

Panera Bread Company is paying more than double what it paid for wheat in 2007 -- an additional $26.5 million this year, according to its latest earnings report.

At Kraft Foods Inc., producer of Ritz crackers and Chips Ahoy cookies, the cost of commodities including wheat were up 9 percent last year, or about $1.3 billion. Spokeswoman Lisa Gibbons called that unprecedented and said the company doesn't expect prices to ease anytime soon.

The company has offset most of those costs by finding savings elsewhere, such as switching its Miracle Whip sandwich spread from glass to cheaper plastic bottles.

At the online baked goods retailer 1-800-Bakery.com, the price of wheat has meant a hiring freeze and curbing low-profit products. So far, those measures have been enough to avoid price increases. But Stephen Pazyra, the company's chief executive, said prices will go up unless there is relief soon.

Sometimes the only option is to bake less.

Four months ago, Tony's Old Fashioned Bakery in Midland, Texas, was paying $7.50 for a 25-pound bag of flour. This week the cost was $23 a bag -- for a company that uses 25 to 30 bags a week.

To stretch their dollar and flour, Carmina Aguilar said her family's bakery is making fewer pastries for display and stopped taking many last-minute orders.

Meanwhile, some consumers are taking the opposite path -- baking more. King Arthur's Bittel said that while store-bought bread is running between $3 and $5, a home baked loaf will cost about 60 cents.

That's up from 40 cents from a year ago, but Bittel said his company nevertheless has seen growing sales of bread-making machines.

Some experts said wheat prices may be close to topping out. But whether prices come down, and when, is a guessing game.

Global wheat stocks have hit a 30-year low following seven of eight years in which world consumption exceeded production. Federal projections show America's supplies at their lowest levels since the late 1940s.

Earlier this week, representatives of the U.S. baking industry went to Washington to ask the Bush administration and Congress to address the record wheat prices.

Lee Sanders, senior vice president of the American Bakers Association, said her group isn't asking for a wheat export moratorium, which countries such as Ukraine, Russia and Argentina have enacted. But the industry does want export policies reviewed to ensure domestic bakers have enough affordable flour.

[raybbr]

Yeah, but according to the CPI inflation’s still around 4%.

[TomGuy]

Experts expect some 80 percent of grocery prices will spike

It is quite evident that those experts don't do their own grocery shopping.

Otherwise, they would have noticed that prices on many grocery items have already increased 10-30% in the last few months.

If the predictions of $4 gasoline hold true, we can see additional spikes.

Bush's commerce/economics teams are avoiding the use of the I word, but it is happening. Inflation is increasing.

[BenLurkin]

The real test will be “wage inflation”. That's where the CPI catches up as the prices of nonfood nonfuel items respond.

[Hardastarboard]

The good news here is that when the government finally steps in, this will all get resolved and we’ll all be much better off. That’s why I’m voting for Obama.

[BenLurkin]

Wage and price freezes, eh?

[Kay Ludlow]

Wage inflation already started with the 20+ states that raised their minimum wages last July and this January. An increase from 5.15 to 6.15 is nearly a 20% increase for that labor, much of which is retail and restaurant. And it doesn’t only effect minimum wages, it ripples up the pay scale through those who ensure their employees are getting 1,3, 3 dollars an hour above minimum wage. Union contract will be following to ensure their employees stay a certain percent above minimum wage. The democrats are at the root of this, with the push to turn food into energy (with the help of the Bush administration), the refusal to allow the drilling of more oil (which would keep energy under control) and the demands for high percentage increases in minimum wage.

[Don Corleone]

Gee, and just when I was getting hooked on Pasta. /snicker

[muawiyah]

The AP article flounders around attempting to find a reason and finally notes that the wheat crop in Australia and other places declined.

Notice that AP does not give us a cause for that decline ~

[Conservative Vermont Vet]

I read (or heard) somewhere that the price of beef is coming down substantially.

GOOD NEWS

It appears that many cattle ranchers can no longer afford the feed for their livestock, thus they are sending them to market in droves, thus flooding the market with beef and depressing the price.

NOT SO GOOD NEWS

However, as by the end of the summer (or year) there will be little replacement of the herds, the cost of beef is expected to sky rocket.

VERY BAD NEWS Thanks all you green environuts as well as the sycophant, corn-growing, farmers-pandering-congress (AND PRESIDENT BUSH) for your purely moronic and self-serving-vote-buying Ethanol policies whereby we burn our food supply.

"BEAM ME UP SCOTTY"

[NVDave]

And no mention of the cratering US dollar, which makes our wheat very, very cheap to countries who have a currency advantage in international wheat markets.

[Constitutionalist Conservative]

The company has offset most of those costs by finding savings elsewhere, such as switching its Miracle Whip sandwich spread from glass to cheaper plastic bottles.

Environmental crisis (global warming) >> Demands for switch to ethanol >> food production and delivery costs increase dramatically >> manufacturers cut costs by switching from glass containers to petroleum-based plastic containers that will clutter landfills forever >> Environmental crisis (but the environmental groups continue to get funding this way).

[CPOSharky]

Maybe this will make the econazies and watermellons realize that you can't burn your food and eat it too.

[tbw2]

Demanding affordable flour? Uh, how about demanding cheaper food by saying we should pay the baker less?

If wheat is too expensive, try oats or corn or potato flour.
If bread is too expensive, buy mix and make your own.

[ex-Texan]

DUH ! . . .

Wait until bread is selling for $ 4.50 per loaf at major supermarket chains like Safeway. Already bread sells for about $ 3.98 in upscale natural food stores. Milk, cheese and cottage cheese exploded in price over last 12 months. Milk will go even higher. Have you seen what breakfast cereal is selling for today ____________________?

Diesel costs are raping the economy. Farmers cannot afford to be paying $ 4.50 for diesel. At that price they may consider giving up some crops. Farming costs are exploding, transport costs go higher everyday. Everything costs more in stores.

Bernanke is destroying the nation with this 'socialism is good for the BIG banks' clap trap.

[PSYCHO-FREEP]

Then Bernanke drops the Interest rates ever further, weakening the Dollar to ridiculous levels. At least Greenspan understood how World economics functioned.

Bernanke is an idiot, just keep reducing interest....That ought to do it. Just print more worthless greenbacks to make up for it. (Inflation? Never heard of it...)

[Farmer Dean]

People will complain about paying 50 cents more for a loaf of bread,then pay 4.50 a pack for cigarettes and say nothing.The kids may not get enough to eat but daddy HAS to have his smokes.

[PSYCHO-FREEP]

I guess it all boils down to, “It’s not just the price of bread that will go up.” I boils down to rapid price increases across the board, from beef, chicken, milk, cheese, eggs and just all food in general.

The average American just can’t grow it in their back yard anymore, like they did in the ‘30’s. Nor can most simply afford to buy land to grow their own food. And they certainly have lost the ability and the knowledge of how.

This is an economy killer. The economic domino’s are rapidly falling into each other as we watch. Those who make smart preparations will emerge the winners, as history has illustrated in the past.

[jiggyboy]

Hurry on down to Safeway, Barilla pasta is $1/lb through Tuesday.

[Farmer Dean]

I hear you load and clear.My costs on the farm are shooting up like crazy too.Some of the things I must have will be scarce or unavailable too.If I can't buy enough seed at any price,(and that's the rumor now)-then expect a price spike like you have never seen before.