Soaring wheat costs means higher costs at bakeries

By Karen Gaudette
3/21/2008

Seattle Times staff reporter

The way wheat prices are hopping up, Puget Sound bakeries from wee Café Besalu to giant Costco might start wishing for Easter baskets of their own this year — stuffed with sacks of flour.

Bakeries of all sizes around the region are raising prices on loaves of bread, hamburger buns, croissants, doughnuts and pastries, some for the second or third time in the past year, trying to keep pace with the rising cost of flour, sugar, eggs, butter and even packaging made from petroleum products.

But for those who make their dough from dough, the hardest increase to swallow has been flour.

Bakers have cringed as the price of the standard 100-pound sack of flour soared from less than $10 at the start of 2007 to anywhere from $25 to upwards of $40 now.

“We’re all shell shocked right now. Anyone who is dealing with that floury stuff is right now finding out basically that the earth has shifted underneath our feet,” said Gillian Allen-White, general manager of Grand Central Baking Company.

“Everyone I know that’s baking is kind of freaking out right now,” said James Miller of Café Besalu in Seattle’s Ballard neighborhood. “We’ve only raised our prices once in seven years yet everything has just gone up so much more.”

National dilemma

Bakers have taken their concerns all the way to the nation’s capital. Baking trade groups that represent giants like Hostess to supermarket chains to family-owned bakeries lobbied Congress last week to put fields currently lying fallow into wheat production.

Wheat costs so much these days for a sheaf of reasons: Crop failures in Australia and Russia, rising demand among the growing middle class in China and India, and soaring shipping costs along with the price of diesel and gasoline. More wheat farmers here and around the globe are also replacing wheat with corn and other grains that can be processed into biofuels.

Washington farmers have moved about 30,000 additional acres into wheat production, said wheat commission chief executive Tom Mick, but that’s small potatoes compared to the 18.5 million acres devoted to wheat around the state. Wheat prices are at record highs, but so are prices for plenty of other grains they grow, he said.

And it’s not all rainbows for wheat farmers. They may be earning more, but they’re also paying more for everything from fertilizer to diesel.

“They’re paying down their debts, but not going out buying new pickups or Cadillacs or anything like that,” Mick said.

The organization that represents smaller bakeries, Virginia-based Retail Bakers of America, is urging its members to raise prices rather than continue trying to absorb the cost. At this point, they say it’s about survival for bakers who have struggled for years to compete against supermarkets.

“It wouldn’t be so bad if it was just the wheat, but we’re dealing with price increases across the board,” said Lynn Schurman, president-elect of Retail Bakers of America and owner of Cold Spring Bakery in Minnesota. “Eggs are up, dairy’s up, some of the shortenings are up … the combination of the different price increases coming is really scary for bakers. I don’t know that it’s ever happened like this.”

The latest consumer price index report from the U.S. Department of Agriculture’s economic research service bears this out. The cost of a dozen grade A eggs rose by nearly 30 percent during 2007 and was expected to rise an additional percent this year. Dairy (milk, cheese, butter) prices rose by 7.4 percent and were expected to go up another 2 or 3 percent in 2008. Fats and oils are expected to increase by as much as 7 percent this year.

Spokane wheat farmer Fred Fleming calls these the highest prices he can remember in four generations of farming Eastern Washington. Once, $6 a bushel was a price that grabbed headlines. Now it sells for about $12.50 at the Portland Grain Exchange.

“Usually in a baker’s life one product might go up and one goes down, so there’s a balancing act. Right now every thing’s just going up, so there’s no balance,” Fleming said.

Fleming co founded Shepherd’s Grain, a collective of farmers growing wheat in a more environmentally friendly manner. In keeping with the group’s goal of sustainability, he’s tried to keep prices below the national average (Shepherd’s Grain charges $9.70 a bushel, or about $26 per 100-pound sack of flour, which they mill).

Stretching the dough

All these expenses have prompted some new coping behaviors. Bakers say they’re making fewer varieties of bread, not refilling stocks when they run out and mixing different varieties of flour — everything they can think of to avoid big price increases.

Miller of Café Besalu has taken to pondering the weather before he pops his trademark croissants in the oven.

“The idea for us is if it’s sort of sunny in the morning and then raining by 11:30, everyone just decides oh, the heck with it, let’s go get a coffee. If it’s rainy, people sleep in in the morning,” Miller said. “Even though none of it is an exact science, you just have to be really careful not to over bake.”

Grand Central, which raised prices around the holidays, no longer delivers more bread to supermarkets than it expects to sell and is encouraging customers to place orders in advance to ensure those cookies and cakes they want will be available, Allen-White said. And, she feels badly about not having as much day-old bread to pass along to charities like Northwest Harvest.

Raising prices is risky business. For consumers already paying more for groceries and seeing $4-per-gallon gasoline on the horizon, at what price will they simply scrap the scone and coffee as too much?

“At the grocery store if milk goes up they just raise the price and that’s that,” Miller said. “When people have coffee and a pastry, they have a mental price they’re willing to pay.”

“Your customers are used to paying a certain amount,” said William Leaman, owner of West Seattle’s Bakery Nouveau. Open barely a year, Leaman says he’s relieved he was able to take food costs into account when he set his prices so that he could delay increases so far. “I’m going to try to hold off on that as long as I can, but when it really starts to affect the bottom line I may have to make some adjustments.”

QFC supermarkets have seen the cost of flour boost prices in both packaged goods and in ingredients used in their bakeries, said spokeswoman Kristin Maas. At Costco, house-baked bread, muffins and bagels went up 50 cents Monday to offset all the price increases.

“We’d been riding it out, hoping things would change,” said bakery operations vice president Sue McConnaha.

Aside from flour, she’s watched the soybean oil her bakers use rise from $23.66 to $60.20 for a 35-pound container over the past year.

Seattle’s Essential Baking Co. has reluctantly raised its prices across the board, and sales and marketing director Anna Li is dreading talk of wheat going even higher. Essential only uses flour from wheat grown organically, which can be tough to find as wheat buyers snap up whatever they can find to send overseas. Independent bakeries are kicking around the idea of banding together to negotiate better prices, she said.

“This is the staff of life and it’s something that we all in this country kind of take for granted,” Li said. “It makes that whole concept of Marie Antoinette ‘let them eat cake’ have a whole new meaning.”

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