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Wheat prices affect bakers' dough

Posted on 01. Jan, 2010 by admin

A surge in the price of wheat has put bakeries in a bind by inflating the price of their primary ingredient -- flour.

The futures price of wheat hit a record high of $8.86 per bushel on the Chicago Board of Trade on Wednesday. That's more than double the September 2006 price of $4.22 a bushel, said Mary Haffenberg, a CBOT spokeswoman. The price of wheat for December delivery fell Thursday to $8.24 a bushel.

"There is no relief in sight," said Brandon Cellone, treasurer of the family-owned Cellone's Bakery Inc. in Pittsburgh's West End. "This is probably the highest (price) we've ever had to purchase flour," noting that the October contract price for a hundred pounds of flour has risen to $20.20. Warren Schaller, co-owner of the century-old Schaller's Bakery Inc. in Greensburg, said, "Flour has really gone up. We get 50,000 pounds of flour every seven-to-10 days, and the price has gone up from $7,750 a (truck) load in January to $9,800." The base price for a hundred pounds of flour has increased from $15.50 in January to $19.60 this month, a 26 percent increase, Schaller said. Wheat prices have fluctuated in the past, but this business cycle is bringing a bad twist for bakeries.

"When you see a little price increase, you expect it to come down. But it has risen steadily. It puts all of the bakeries in a bad position, just to stay in business," said Mary Mancini Hartner, president of Mancini's Bakery Inc. of McKees Rocks. Mancini's Bakery has seen the cost of its bulk flour -- priced per hundred pounds -- jump by 40 percent since June, Hartner said. The bakery can make about 140 loaves of bread for each 100 pounds of flour it uses, Hartner said. The rise in wheat future prices could be blamed on a drought in Australia, a large wheat-producing country, coupled with rising worldwide demand, Haffenberg said. Wheat consumption in growing economies like China have added to the pressure. While wheat prices have surged in the past year, the price of bread at the store has not risen as much. Prices began rising in the second half of 2006, according to the U.S. Department of Labor's Bureau of Labor Statistics. Overall, baked good products, including bread, cakes, crackers and other items, experienced a 4.2 percent average price rise from January through July, up from 2.2 percent during the same time a year ago.

Wheat has been estimated to make up about 5 percent of the value of a loaf of bread, said Jay O'Neil, senior agricultural economist at Kansas State University's International Grains Program. For now, Mancini's is holding the line on its prices, even though its other costs, such as natural gas to heat the ovens and fuel for delivery trucks, have risen as well. "We haven't (increased prices) yet, but I don't know how long I can continue to do it. It's unfortunate, but it has to be passed on" to the customers, Hartner said. The surge in wheat prices makes a huge dent in profits when a bakery like Cellone's is buying five, 50,000-pound truckloads of flour a week.

Cellone's Bakery has increased the price of baked goods it sells to supermarkets and restaurants by 5 to 10 percent over the past year, Cellone said. Increasing prices is difficult for his family-owned business, Schaller said, because they sell much of their baked goods through contracts with businesses and institutions like hospitals and schools. "It's hard to pass it on because so much of the business is on bids, for three months, six months and a year," Schaller said.

By Joe Napsha, TRIBUNE-REVIEW Friday, September 7, 2007