Wheat shortage sends bread, pasta prices soaring

Last Updated: Wednesday, February 20, 2008 | 12:13 PM ET

CBC News

Soaring wheat prices have Canadian bakeries struggling, farmers rejoicing and customers digging deeper at the till to pay for their bread and pasta purchases.

The price of flour has been climbing steadily over the last year.
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The price of flour has doubled in the past two months as weather problems, including two years of droughts in Australia, have depleted wheat stocks to lows not seen since the 1970s.

Also contributing to the shortage is the flux of grain farmers switching to other crops, such as canola or corn, that produce biofuels.

"It's a very, very tight situation," said Canadian Wheat Board analyst Bruce Burnett. "World production has been under consumption in the last couple of years, so we have been drawing stocks down … and we've finally hit levels that have made the market very, very concerned about supplies and rightly so."

Burnett said the prices are likely to remain high for at least another 18 months, as it could take up to three years of strong harvests to rebuild the worldwide stocks.

Bakers rising prices

The pricing crunch is affecting bakeries, and their customers, across the country. In Winnipeg, KUB Bakery said its prices need to go up to help cover the rising costs.

"We're not going to gouge anyone, we're going to take what we need to stay afloat. Bread is going to have to go up, any product with wheat in it will go up, that's a certainty," Ross Einfeld, the bakery's manager, told CBC News.

"I'm sure all bakeries across the board have the same problem. Their flour price has doubled, their ingredient price has doubled. So you're going to see prices increase."

Calabria Bakery, in Scarborough, Ont., is also finding rising flour prices a challenge.

The bakery's Sam Cuzzolino said they use roughly 15 tonnes of flour a month for bread and pizza dough and "as far as the bread side goes, if we're breaking even I'd be amazed at this point."

He said if the profits in the 50-year-old business continue to decline, he'll have to consider stopping baking bread altogether.

Mount Pearl, N.L., bakery manager Tom Bennett said bakeries can only swallow flour increases for so long.
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"It's such a labour intensive thing and really, when you see the cost going up …to pass it on to the customer, it's a very big increase for them to swallow," he said, adding that his customers would be upset if he raised his prices from $1.75 to $2.50 a loaf to help cover the costs.

The rising costs are also shrinking the bottom line at Coleman's grocery store in Mount Pearl, Newfoundland.

"From what we were paying a year ago to what we're paying now, it's actually phenomenal," said Tom Bennett, bakery manager.

"You wouldn't really think all these different things going on would affect the price of flour here in Mount Pearl, but it has."

Soaring prices have farmers 'optimistic'

While bakeries are struggling, the high prices are encouraging for farmers.

Doug Chorney, a wheat farmer near Winnipeg and a member of farmers' group Keystone Agricultural Producers, says he and his colleagues are "very optimistic."

"These are the best prices for wheat we've seen in many farming careers, perhaps ever. Everyone is optimistic this is going to be a good year, providing we can produce the crop that hasn't grown yet," he said.

Chorney, who said he has already decided to plant more wheat this year, also said the expected profits may help keep some farmers in the industry.

It "may encourage some young farmers to stay on the land and take up farming as a career," he said.

With files from the Canadian Press