Archive for Wednesday, December 19, 2007

Surge in wheat prices good for economy but will increase bills at grocery store

December 19, 2007


In the nation's breadbasket, record wheat prices hovering in the $10-per-bushel range are a welcome sight.

"This is healthy for the farm economy, and that will be good for the state," Mike Woolverton, a grain market economist at Kansas State University, said Tuesday.

But like most news related to agriculture, there is a downside.

Surging wheat prices will add to ever-increasing grocery bills already pumped up by escalating energy costs.

And the record wheat prices happen to be occurring at a time when Kansas fell from its traditional place as the No. 1 wheat state in the nation because of a harvest damaged by freeze and floods.

"Bottom line is, I don't think we're much better off than last year," said Dean Stoskopf, a wheat farmer in Hoisington.

Still, these are heady times for anyone selling wheat. Prices have doubled since the start of the year. In Kansas, there are about 63,000 farmers, and 28,500 of them grow wheat, according to state statistics.

There are a number of reasons for the price increase, experts say.

World supplies are down, in part due to severe drought conditions in Australia and Argentina.

Meanwhile, rapidly growing economies in some nations are driving up demand.

The price of wheat also is boosted because more farmers are planting corn that will be used to make ethanol.

"Wheat is coat-tailing with some of the other commodities," said Eddie Wells, deputy director of the U.S. Department of Agriculture's National Agricultural Statistics Service, Kansas field office.

This will boost income for farmers, but farmers also are seeing increases in their costs of doing business.

"As their prices go up for what they produce, their prices go up for making that production, such as rental rates for land, increases in fertilizer and pesticides, which are all tied to fossil fuel costs," Wells said.

That's what Stoskopf said he is seeing with his 1,000 acres of wheat. Fuel costs alone have tripled in the past three years, he said.

"Input prices have gone up just about as fast as the price of wheat has," Stoskopf said.


Chris Golledge 10 years, 6 months ago

The last I heard, the actual cost of the wheat that went into the making of bread and cereal was a very small fraction of the cost of the bread itself. Most of the difference was in marketing costs. Memory is a little vague on that, but I think the general gist is still true.

If that is true, then any significant rise in food costs is just the producers (the companies that make bread and cereal, not the farmers) gouging the consumer.

Anyone have any solid info in this area?

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