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The Honolulu Advertiser
Posted on: Sunday, March 30, 2008

Wheat shortage crippling bakers

By Jerry Hirsch
Angeles Times

LOS ANGELES — When Julien Bohbot opened a French-style patisserie six years ago, he thought the competition for his small Delice Bakery would come from the other kosher bakeries down the street.

But now Bohbot is competing with bakers from Paris and Pretoria — all in search of flour. Short supplies have raised the price of wheat worldwide and sparked protests over the cost of tortillas in Mexico and pasta in Italy. In the United States, it's raised the cost of such basic goods as bread, cereal and pizza.

The latest statistics from the federal government have given Bohbot more reason to worry. The price of bakery and cereal products rose 1.8 percent in February, the largest monthly increase since January 1975. Overall, the cost of eating at home has risen more than 5 percent this year, the fastest rate since 1990.

Mike Celeste, a financial adviser in suburban San Dimas, has experienced the increase firsthand. Since October, the price of the two-loaf bag of sourdough bread he frequently buys at Sam's Club has jumped 28 percent to $4.06. Celeste said the warehouse chain also raised the price of the fresh pizza he likes by 90 cents, to $8.87.

The price of white bread has risen 19 percent in the Western U.S. since June, according to the government.

The plight facing small bread makers like Bohbot — and much larger businesses such as Sara Lee Corp. — prompted the American Bakers Association to hold a protest march in Washington, D.C., earlier this month.

"It is crucial that the White House, our elected representatives and the Department of Agriculture hear firsthand how bakers ... are struggling with current market conditions," said Robb MacKie, chief executive of the trade group. "Wheat markets — and commodity markets in general — are behaving in ways that we have not seen before. We believe that extraordinary circumstances call for extraordinary measures."

As the bakers were marching, wheat hit a record price of $12.70 a bushel. It fell back to $11.60 two days later but still stands 31 percent above where it started the year.

A series of wheat crop failures abroad, combined with the U.S. dollar being at historic lows against the Euro and other currencies, has forced Bohbot and other bakers to compete with the rest of the globe for grain — even what's grown in the United States.

Bohbot said it's only going to get worse. His supplier will be increasing the price of flour "to $30 next week and said it could be $60 in a few months."

Big companies are pushing their prices up, too. Three times in the past year, Sara Lee raised what it charges supermarkets for its bread and bagels — an average increase of 25 cents per product.

Pizza makers also are struggling with higher flour prices.

"We are really nervous. What happens if we have to charge $14 or $15 for a pizza that we sell for $9.95 now?" said David Sanfield, co-owner of a chain of three Los Angeles restaurants that buys more than 7,000 pounds of flour a month.

Some bakers want the government to create a strategic reserve of wheat, similar to the emergency oil supply it keeps on hand.

Last week, MacKie, the head of the bakers' association, called for a reduction in the federal Conservation Reserve Program, which pays farmers to plant ground cover instead of wheat or other crops — thus improving water quality, controlling soil erosion and creating habitat for waterfowl and other wildlife.

He believes such a move could free up as much as 7 million acres for planting wheat and other food crops. MacKie also wants the government to waive penalties for farmers seeking early release from the program, which typically locks up land for 10 to 15 years.

The trade group also said the government needs to better balance the use of farmland between food and fuel needs.