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Alfredo 09-02-2007 08:28 AM

Are your flour costs rising? (no pun intended)
Has anyone experienced an abnormal spike in the cost of flour? I am a futures broker by trade and have watched the price of wheat more than double in the past year-and-a-half or so. We are all used to rising petroleum prices being reflected in more expensive fill-ups, but I am curious how other commodities react to large changes in raw materials. Coffeee and olive oil went nuts in the mid-'90s - is flour costing more lately?

If I do this right, this link should take you to a chart of wheat prices for the past two years: - Charts - ZWU7 WHEAT [E] September 2007 CBOT

dmun 09-02-2007 10:41 AM

Re: Are your flour costs rising? (no pun intended)
What's the purple line on the chart?
The US government maintains the fiction that there is no inflation by exempting from the consumer price index the "volitile" prices of food, energy, and home ownership (as opposed to renting). I know from the checkbook that everything that counts has skyrocketed in price. In my little corner of the world, the price of metals, in particular copper based alloys, has gone silly in the past couple of years.

One of the factors in the cost of grains is that so much corn is going into ethanol production for auto fuels, and that has pushed demand into other grains. I think i'm going to get a bumper sticker that says "Bio-fuels - Driving the world into starvation"

RCLake 09-02-2007 11:04 AM

Re: Are your flour costs rising? (no pun intended)
Dmun is right, early this year the futures for corn was a lot higher and farmers switched their acreage from wheat to corn. I part time farm in North Dakota and the new cash crops are corn and soybeans whereas wheat had been the primary corp for decades. Corn prices have come down this year and if prices stay roughly the same next spring, the decision will be to plant more wheat and the cycle will continue.
As a matter of fact in two weeks I'm going up for soybean harvest for three weeks. When I get back I'm planning on starting my WFO so I'll be looking for great advice at that time.

Alfredo 09-02-2007 11:21 AM

Re: Are your flour costs rising? (no pun intended)
The purple line indicates the level of "open interest", which is a technical term used to indicate the number of futures contracts existing during the subject time period (here, each chart bar represents one week's price range). The vertical red lines are a measure of volume of contracts traded during each week. Interpreting these things as they apply to price action is a pretty esoteric study, but fortunately not at all relevant to the chart at hand for our purposes.

The "fudge factor" is a pretty important component in the equation the government uses to calculate statistics, especially inflation numbers. Don't know why they bother - no one is fooled an more.

If you're going to produce ethanol - the value of which is a whole separate debate - sugar is a far more efficient source material than corn. Now let's see - how large is the sugar industry lobby and how large is the corn industry lobby in the U.S.? Political considerations, anyone?

Wiley 04-09-2008 09:40 PM

Re: Are your flour costs rising? (no pun intended)
UPDATE: A couple of weeks ago I saw at Costco a 50 lb bag of flour that said of its label that it was suitable for "Hearth Breads". I told a friend who has a 60" inside dia WFO about it and he asked if the next time I was there would I buy him a bag. I did and last week the 50 lb bag cost $14.99.

I just got back home from a shopping trip that included Costco. Tonite the price was $19.99 for the same 50 lb bag. Now my my math skills aren't the best, but a $5.00 increase on a $14.99 bag is a 33% increase in one week isn't it? WOW!


Frances 04-10-2008 05:43 AM

Re: Are your flour costs rising? (no pun intended)
Gaah, makes you sick!!

Here we are (well I don't know about you lot, but me anyway) turning off the standby lights on electronic appliences, trying to save water, only driving when necessary, buing organic foods that are in season etc etc, basically trying to do my bit to help the environment, and then they go and do things like this! Where's the point in it?

CanuckJim 04-10-2008 07:39 AM

Re: Are your flour costs rising? (no pun intended)

You're a lucky man, believe me. Six months ago, I could buy a 20 kilo bag of hard, unbleached bread flour from a bulk supplier for $14 and change. That same bag of flour now costs $32 and change. Ouch.


gjbingham 04-10-2008 08:00 AM

Re: Are your flour costs rising? (no pun intended)
It appears the whole upward spiral is drivin by the cost of fuel. Our precious American way of commuting alone 60 miles to work each way, every day to distant jobs that pay for our extravagant lifestyles along with our reliance on food sources transported from all over the world so that we have fresh strawberries in January, have made us slaves to foreign oil. There are, of course, mnay other similar examples of how our society has built itself around oil. We all know that we have absolutely no say in what the price of that oil will be, yet we cannot live without it.
Great discussion, unfortunate result. Buying and supporting locally produced products may be the best way to fight this battle in the future.

asudavew 04-10-2008 08:44 AM

Re: Are your flour costs rising? (no pun intended)
Sam's 25 lb bag bread flour.

18 months ago .. under $5.00.

Last Saturday.. $9.79

Alfredo 04-10-2008 09:23 AM

Re: Are your flour costs rising? (no pun intended)
A lot has happened in the grain markets since I first posted this topic. The price of hard red spring wheat averaged around $5 a bushel in '06 and '07, but briefly spiked to an astounding $24 at the beginning of this year (see chart link below). Hard red spring wheat is one of the highest-protein wheats grown. It is found in bagels, high quality breads and cereals. It is currently trading in the neighborhood of $13 a bushel.

A great many things have contributed to this incredible price inflation - growing worldwide demand (improving economies in third world countries lead people to improve their diet), rising energy costs (for transportation, farm operation and fertilizer production) and the diversion of food crops and acres to energy production (ethanol - to my mind the greatest boondoggle since, well, since the last boondoggle).

Although bakers will have noticed an increase in costs, the people I feel for most in this environment are the farmers, many of whom have been squeezed from both ends. Futures markets exist to allow producers and consumers to transfer the risk of price volatility to those who embrace that risk in the hope of profiting from it. Farmers "hedge" their production by selling for future delivery, but they finance this transaction, usually with borrowed money. As the value of what they sold rose they were required to put up ever increasing amounts to maintain their hedges, and in some cases the interest costs have been ruinous.

At delivery time futures and cash market prices are expected to converge, allowing producers to take advantage of the higher values. This year, however, there was a serious disconnect between tke two, much to the detriment of farmers' cash receipts. A very bad situation, and one which is the cause of a great deal of concern in the industry :(

This link should take you to a chart of the wheat in question. Each vertical mbar represents the range of prices during one week: - Charts - MEK8 SPRING WHEAT [E] May 2008 MGEX

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