PRICE HIKE MAKES CONSUMERS FEEL LIKE TOAST,
WASHINGTON STATE UNIVERSITY SAYS
PULLMAN, Wash., Jan. 15 /PRNewswire/ -- The following was released today by Washington State University, College of Agriculture and Home Ecnomics:
Who's half-baked here?
Is it the nation's biggest bread makers who have boosted the price of bread 5 to 10 cents and blamed it on the Soviets? Or is it grain farmers who claim the rise in wheat prices isn't enough to account for such a hike?
As bakers and wheat growers argue over who's to blame, consumers can end up feeling like toast.
Some of the conflict comes from the fact that the two groups don't always speak the same language. Wheat growers and economists most often speak in terms of one-pound loaves of bread. While the standard in the baking industry is 1.5 pounds.
And prices vary. Wheat sold in Portland frequently sells at a different price in Kansas City, and what farmers receive for wheat is not the same price the baker pays. There are different kinds of wheat. And, of course, different kinds of bread; rye bread, whole wheat bread and white bread require varying amounts of wheat to produce.
But economists agree that recent increases in the price of wheat can't account for 10 cents or even 5 cents a loaf.
"That kind of price increase is more than could be accounted for by the increase in farm prices of wheat," said Leroy Blakeslee, an economist at Washington State University.
He confirmed that the price of wheat, the main ingredient in nearly all bread, rose about 50 percent between June and December -- mainly due to an agreement to sell more U.S. wheat to the Soviets.
In June, farmers received an average of $2.55 for a bushel of wheat, Blakeslee said. At that price, the farmers' share in a 1.5-pound load of bread was about 5 cents. Using $3.82 -- a figure 50 percent higher than the June price -- the farmers' share would go up to 8 cents, a 3-cent increase.
But, because of costs between the farmer and the baker -- such as shipping, cleaning and milling -- the increase to the nation's bakers was undoubtedly more than that, Blakeslee said.
Often these costs in the middle increase on a percentage basis, so as the price of wheat goes up, the cost of shipping, cleaning and milling also go up, he said.
Ralph Parlett, an economist with the U.S. Department of Agriculture in Washington, D.C., agrees that farm prices don't fully account for the hike in bread prices.
"I think what happens is they'll take increasing prices in wheat -- especially if they're well-publicized -- as a good opportunity for the industry to raise prices. And it may not all be due to the cost of wheat," Parlett said.
Blakeslee added that although prices have gone up, they've come up from a low period. In 1988 and 1989, farmers received an average of $3.72 for a bushel of wheat, a figure comparable to 1991 prices. In 1990 the average price dropped to $2.61.
In each of those years, the average price of a loaf of bread went up.
David Harlow, chairman of the Washington Wheat Commission, said wheat prices stabilized in the past year rather than increased.
"It would be more accurate to say that wheat prices have normalized, since 21 months ago prices were bottomed-out.
"The fact is, U.S. commercial bakers have benefitted from the surplus stocks and low wheat prices of past years, though they haven't necessarily passed the benefit on to the consumer," Harlow said.
Paul Abenante, president of the American Baker's Association, disagrees.
"Flour is the key component, but it isn't the only one," he said, citing increases in labor, health care and environmental compliance costs.
"Low (wheat) prices allowed the baking industry to absorb those other costs," he said. "But with a 30-percent increase in the price of flour and other costs, the industry doesn't have much choice."
/CONTACT: Dena M. Olsen of Washington State University, College of Agriculture and Home Economics, 509-335-2867, or after hours, 509-334-1971/ CO: Washington State University ST: Washington IN: FOD SU:
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