Contrary direction of costs and prices jarring reminder for bakers


BakingBusiness.com, Jan. 25, 2011
by Josh Sosland
Anyone casually following the financial health of baking knows of concern about and the importance of price increases for baked goods in 2011. Baking executives, financial analysts and others have repeatedly emphasized the need for more rational pricing if baking is to be nursed to restored vigor.

Still, data issued earlier this month by the Department of Labor drove the point home even more powerfully. The Consumer Price Index for baked foods and cereal products fell last year, marking the first decline in 34 years — since 1976. The overall decline was a modest 0.8%, but for bread alone, the drop was 1.7%, including 2% for white bread and 1.4% for bread other than white.

Particularly instructive in trying to understand the pricing data is looking back at what was transpiring in 1976, the last time the bread price index declined. After a breathtaking rise earlier in the decade, farm prices for wheat in 1976 plunged 30%, the second largest single-year decline in the past 70 years.

It may not be surprising that some price pressure came to bear in such an environment. In 2010, by contrast, wheat prices were up 45%, the fifth largest advance of the last 70 years. Further, other inputs factoring into the cost of grain-based foods like labor (and health care), energy and many other ingredients aren’t moving in the industry’s favor either. The C.P.I./wheat price data should serve as an exclamation point for any baking executive still waffling over pricing strategies for the months ahead.