It's no news to anyone pushing a shopping cart through a grocery store that prices have been going up. The price of products made from wheat have drawn particular attention because of record high prices being reported on grain exchanges.
It would be wrong, however, to think that wheat farmers in Kansas or anywhere else are reaping a windfall from the price of a bag of pasta or a loaf of bread.
In the first place, most farmers have long since sold last year's wheat crop - and at prices far below the current $11 or $12 per bushel. They thought they were doing well back when they sold their wheat for $8 or $9 a bushel in order to make loan payments or pay fertilizer bills that were due after harvest. Many already have sold this year's wheat through the futures market, but others are hesitant to commit to a price while the market is showing such fluctuation.
Some of the figures reported by the national media also exaggerate how much the price of wheat affects consumer products. An Associated Press article last week implied that most of the reason the price of a loaf of bread had jumped from 69 cents to $1.09 was because of the price of wheat. Yet, elsewhere in the same story, a spokesman for a wheat industry group estimated that consumers pay an additional penny on wheat products for each dollar the per-bushel price for wheat increases. So even if the price of wheat has gone up $10 a bushel, that would account for only a 10 cent increase to consumers, not a 40 cent increase in bread prices.
Far more important than the price of wheat are the costs to package, advertise and transport that bread to market, not to mention paying wages and health insurance costs for bakery employees. According to the Kansas Wheat Commission, a one-pound loaf of bread had about 4 cents worth of wheat in it 10 years ago, compared with about 11 cents per loaf by December 2007. During that same period, the price of a gallon of regular unleaded gasoline rose from about 97 cents to about $3.05. That raises the cost of getting a loaf of bread to market, but it also greatly affects the cost of operating farm machinery and fertilizing crops.
The price of wheat is causing some nervous flour users to call for the government to pull land out of conservation programs or restrict the sale of wheat overseas. That would be an overreaction that would hurt wheat farmers who have worked hard to develop international markets.
The fact that food prices are rising is a legitimate concern to families trying to stretch their budgets. But while it may be tempting to make the simple connection between rising wheat prices and the price of bread, it's important to consider the many other factors involved.