Wheat prices soar. Are bread prices next?

[MNeagle]

http://i2.cdn.turner.com/money/2010/08/05/news/economy/wheat_prices/wheat.png
If prices continue to surge, you may wind up feeling the pinch. Click the chart to see more on wheat and other commodities.


NEW YORK (CNNMoney.com) -- With wheat futures soaring to their highest level in two years, you could soon find yourself paying more for a loaf of bread at your local grocery store.

The price of wheat has surged more than 80% from its seven-month low in June. Prices continued to rally Thursday, surging to their highest level since August 2008, after Russia said it would ban grain exports until Dec. 1 due to a drought that has destroyed more than 20% of its wheat crop.

If prices continue to surge, you could wind up paying 25% to 30% more for a loaf of bread and at least 10% more for a pizza by the end of August or early September, said Darin Newsom, a senior analyst at Telvent DTN, an agriculture and commodities information company.

That would translate into a price hike of as much as 90 cents more for a $3 loaf of bread, and a bump of $1.40 for a $14 pizza.

"Wheat is moving up so much, there's going to be a ripple affect on what we're seeing at stores and restaurants," said Newsom. "We haven't seen it play out yet, but we certainly will."

Some think it's still too soon to plan for price hikes at the retail level.

"Even though the price has gone up in the futures market, it has to continue to go higher or stay at these levels for another 20 or 30 days in order to justify a rise at the store," said Mark Schultz, a chief analyst at Northstar Commodity. "Longer term, provided that the drought in Russia doesn't get better, we'll likely start seeing prices have to move higher in the retail level, I'm just not sure if the rise in [futures] is significant enough yet."

If wheat prices do stay this high, expect to pay more for your rolls and pastries too, said Robb MacKie, a spokesman for the American Bakers Association.

"[Wheat] is the number one ingredient for bakers and therefore one of their top costs," he said. "If prices hold at this level you might turn around in three months and say, 'Hey, I used to pay $1.25 for this baguette and now I'm paying $3.25 -- what happened?"

A spokeswoman for General Mills, one of the world's largest food companies, said the company doesn't comment on its pricing policies.

Out of wheat?: Because Russia is one of the world's largest grain exporters, its wheat shortage has significantly driven up demand for the grain, and investors are worried that other areas of the world may be next to see their crops dry up.

"The drought in Russia is definitely the key factor to the rise in prices, but we've also seen problems in Canada, where crops are going to be smaller this year, and Australia may have a smaller crop, so there are other parts of the world that are seeing problems," said Newsom. "The real question is what stocks of wheat on hand are going to be globally."

The United Nations' Food and Agriculture Organization said Wednesday that it has cut its global wheat production forecast for 2010 nearly 4% to 651 million metric tons, down from its June estimate of 676 metric tons.

And while the U.S. has enough wheat on hand without getting it from other countries, it will be forced to ship its wheat elsewhere if global demand for the grain continues to increase but "we're not going to run out of wheat," said Newsom.

http://money.cnn.com/2010/08/05/news/economy/wheat_prices/index.htm?source=cnn_bin&hpt=Sbin

[horseshoe3]

Every time I see an article like this I have to laugh. That $3 loaf of bread has about $.08 of wheat in it. If the prices stay up long enough to go through to the bakers, that will add $.05 to their cost. So we're supposed to believe that since they sustained a 5 cent cost increase, they have no choice but to raise their prices 90 cents.

BTW, 2 years ago, wheat was a lot higher than it is now. Bread prices went up and have not come down. They are making bread with $5 wheat and charging the same as they did when wheat was $13. Now that wheat is up to $8 they have to raise their prices above what they charged when wheat was $13. Makes sense to me.

[MNeagle]

The biggest space hog in my freezer are loaves of bread. My last purchase was loaves of frozen bread dough, takes up much less space & makes the house smell wonderful when it's baking!!

[old steel]

Every time I see an article like this I have to laugh. That $3 loaf of bread has about $.08 of wheat in it. If the prices stay up long enough to go through to the bakers, that will add $.05 to their cost. So we're supposed to believe that since they sustained a 5 cent cost increase, they have no choice but to raise their prices 90 cents.

BTW, 2 years ago, wheat was a lot higher than it is now. Bread prices went up and have not come down. They are making bread with $5 wheat and charging the same as they did when wheat was $13. Now that wheat is up to $8 they have to raise their prices above what they charged when wheat was $13. Makes sense to me.


+1

They did the same thing 2 years ago with barley and beer prices. Now that malt barley is much cheaper beer is still priced high never has come down.

[Ponce]

Have about 15 sacks in storage, now I have to learn how to make bread....... :oo-->

[Saul Mine]

Every time I see an article like this I have to laugh. That $3 loaf of bread has about $.08 of wheat in it. If the prices stay up long enough to go through to the bakers, that will add $.05 to their cost. So we're supposed to believe that since they sustained a 5 cent cost increase, they have no choice but to raise their prices 90 cents.

BTW, 2 years ago, wheat was a lot higher than it is now. Bread prices went up and have not come down. They are making bread with $5 wheat and charging the same as they did when wheat was $13. Now that wheat is up to $8 they have to raise their prices above what they charged when wheat was $13. Makes sense to me.


??

Even the cheap stuff from the feed store costs $17 for 50 lbs, which is $.34/lb, which is $.51 for a 1 1/2 lb loaf. The super clean grain for human consumption runs about three times that much.

I sure am glad I got several hundred lbs last year.

[Tumbleweed]

I bought some wheat from one of the local sod busters last year for .06 cents a pound. It hadn't been cleaned and had a few straws and grasshoppers in it but the grasshoppers just add a little protien to it. It makes really good bread!!

[silversurfer]

this development just added 10 years to my life

no more wheat products for me

[ximmy]

Wheat prices soar. Are bread prices next?
Yes, bread prices are next.. Cake prices to stay the same though, say Michelle Obamo

[ShortJohnSilver]

Even the cheap stuff from the feed store costs $17 for 50 lbs, which is $.34/lb, which is $.51 for a 1 1/2 lb loaf. The super clean grain for human consumption runs about three times that much.

I sure am glad I got several hundred lbs last year.


I don't know where you are doing your shopping, a few months ago I checked a local restaurant supply store and depending on kind, is was about $14 per 50lbs. Be sure, that Pizza Hut and your local bread making company are paying far less than that.

[willie pete]

Wheat prices soar. Are bread prices next?
Yes, bread prices are next.. Cake prices to stay the same though, say Michelle Obamo


I thought I heard her say "let them eat cornbread?" :D

[Phoenix]

That $3 loaf of bread has about $.08 of wheat in it.


80 cents I can believe.

[PatColo]

I think corn is gonna "go wheat" next... loop current hosed, gulf stream hosed, normal climates hosed, oil/corexit-rain ruining crops who knows how extensively.

http://tfccharts.com/charts/CNW.GIF

[PatColo]

Ruppert: Peak Food? Just a 1 minute tease, I'd guess it's a longer message for subscribers, which I'm not.

http://www.youtube.com/watch?v=8QaM5YnIGqc&feature=player_embedded

I might peruse the grains charts over the weekend, and grab some futures on Monday. Corn, maybe others. Is there a corn ETF? The futures are hairy... with the leverage and all.

[PatColo]

I think corn is gonna "go wheat" next... loop current hosed, gulf stream hosed, normal climates hosed, oil/corexit-rain ruining crops who knows how extensively.

http://tfccharts.com/charts/CNW.GIF


Corn stalks wheat rally (http://wallstreet.blogs.fortune.cnn.com/2010/08/05/corn-stalks-wheat-rally/)

A soaring wheat price could mean costlier corn.

http://fortunewallstreet.files.wordpress.com/2010/08/corny.png

[PatColo]

I might peruse the grains charts over the weekend, and grab some futures on Monday. Corn, maybe others. Is there a corn ETF? The futures are hairy... with the leverage and all.


Teucrium Corn Fund- just launched in June, the first ag commodity ETF, ticker CORN (http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=CORN&sid=5006857&o_symb=CORN&freq=1&time=6)

[MNeagle]

Wheaties

shredded wheats?

natural garden here

no wheat products for human consumption here

this point on

under the radar


No pizza, bread of any type, cereals, noodles, crackers, cookies, cakes, anything with flour in it?? Good luck.

My SIL has celiac disease, so she had to eliminate all those things, but it's a tough go.

[horseshoe3]

OK, let's do the math. There are 60 pounds in a standard bushel. That bushel will make 70, 1# loaves of bread. The KCBOT price has been around $5.60 for quite a while before the recent climb. $5.60/70=.08. This is how the bread companies buy it.

When you buy it by the fifty pound bucket, that includes about 1.5 cents per pound for cleaning and ~$11.00 of markups.

[Atocha]

We purchase 120,000 lbs of 12 percent protein white flour in 40,000 lbs truck loads a day. It is not bagged but blown into a silo.

The current price we pay is $18 per cwt {100 lbs} If bagged, it is $1 more per cwt.

One year ago we were paying approx $11-$12 per cwt

We calculated we use 15 square miles of wheat every year.

You could say we are rolling in the dough.

I have seen a high of $22 per cwt. in the past.

[Atocha]

The biggest space hog in my freezer are loaves of bread. My last purchase was loaves of frozen bread dough, takes up much less space & makes the house smell wonderful when it's baking!!


Exactly my business Manufacturer of "Frozen Dough"

[Atocha]

Have about 15 sacks in storage, now I have to learn how to make bread....... :oo-->


Hope you don't get weevils...All flour will develop weevils unless you refrigerate or freeze it.

When grain is milled into flour, weevil eggs are present. The flour is then run through a centrifuge that breaks/destroys the weevil eggs BUT it is impossible to get them all...

All flour will develop weevils over time...

[StackerKen]

This how I buy my wheat...

It's $28 now
Case of (6) #10 cans of hard red winter wheat (33 lbs. total net weight).

Free shipping though.

http://i61.photobucket.com/albums/h55/baytraderken/storage-wheat.jpg

I think it may have gone up a couple dollars in the past year.

But I think I have enough now :)

[zap]

Have about 15 sacks in storage, now I have to learn how to make bread....... :oo-->


Hope you don't get weevils...All flour will develop weevils unless you refrigerate or freeze it.

When grain is milled into flour, weevil eggs are present. The flour is then run through a centrifuge that breaks/destroys the weevil eggs BUT it is impossible to get them all...

All flour will develop weevils over time...


Good then you'll have a little protein with your carbs. :D

[cpy911]

Strange, every field around me here in the Pacific Northwest has wheat growing on it, never have I seen so much wheat here. In past years it was usually some other crop. Hundreds of acres, and this is on the western side of Oregon. I can only imagine the vast acreages of wheat growing in eastern Oregon, let alone the bread basket.

So, did the farmers know last fall that wheat was the ONE to break out this year? Now they are increasing supply, which will reduce demand and so the cycle continues...with all the growing there will be so much wheat, no one will buy it at some point.

[horseshoe3]

Here in the breadbasket, we are seeing the opposite. For the last 100 years, wheat took up over 80% of the grain acres in my area. Ten years ago, we started seeing more milo and beans, and then over the last 5 years, corn has become more common. Now, I would estimate that wheat has about 40% of the grain acres.

I think it had to do with farmers wanting to diversify into other crops at first. Then, came the corn varieties that could tolerate less water and more heat. When corn first started making inroads in this area, most of it got chopped for silage because it didn't make grain. Now, everything gets harvested for grain.

[Ponce]

Just took a quick peek in one of the containers........still bug free after three years.........suck the air out of the container till next time.

[gunDriller]

i'm thinking, if you can get organic wheat for a decent price, like $1 a pound, then it's a good time to load up.

well, it's always been a good time to load up, i just expect wheat to get a little more expensive.

[Olmstein]

Wrong again, Phoenix. Maybe you should do a little more thinking, and a little less posting.

http://cdn2.knowyourmeme.com/i/26438/original/pwned.jpg?1258135941

Nice one, Horseshoe3.






That $3 loaf of bread has about $.08 of wheat in it.


80 cents I can believe.




OK, let's do the math. There are 60 pounds in a standard bushel. That bushel will make 70, 1# loaves of bread. The KCBOT price has been around $5.60 for quite a while before the recent climb. $5.60/70=.08. This is how the bread companies buy it.

When you buy it by the fifty pound bucket, that includes about 1.5 cents per pound for cleaning and ~$11.00 of markups.

[MAGNES]

The Russians made an announcement, this is why the spike,

NO EXPORTS !

Imagine having inside info on that one ?

Many did.

Israeli spies passing along info to GS and JPMC.

[Gknowmx]

Just took a quick peek in one of the containers........still bug free after three years.........suck the air out of the container till next time.


I will second that. I have a bushel of red and a bushel of white that I vacuum sealed in 1/2 gallon canning jars two years ago. Opened a 1/2 gallon to use to make 'Raspberry brandy' a month ago. No bugs. Made good drink.

[PatColo]

I might peruse the grains charts over the weekend, and grab some futures on Monday. Corn, maybe others. Is there a corn ETF? The futures are hairy... with the leverage and all.


that corn's been some good eatin, I don't care what y'all say. ;D

Daily Dec-10 corn chart with arrow on Mon Aug 9 when I went long. Almost got stopped out by two days later @ 405 , but the drop bottomed @ 405.8.

Plus weekly corn chart ("continuous contract", slightly diff price scaling than the Dec contract), red line shows corn's making a nearly 2 year high.