Commodity Price Increases

[gfron1]

This has been going on for a couple of years, but recently my distributors seem to be sending me price increase letters on a weekly basis. The latest from a German foods distributor is citing these figures:

-Milk 50-80% increase

-Wheat 64% in the past year

-Milk Powder 70% in the past 8 months

-Cocoa 49% in the past 8 months

-"Auxillary ingredients" (such as lactose) 250% in the past year

They're citing bio fuels, poor harvests for grains due to environmental conditions, and major shipping channels being overloaded and thus raising their prices.

This really seems out of control. Being a skeptic I never know if these figures are legit or padded to make an extra buck, but either way, prices are going up and so get ready to pay more at the grocery.

[Dave the Cook]

If harvests are down, how can shipping be up?

[ChefCrash]

If harvests are down, how can shipping be up?

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Gasoline prices?

[Pierogi]

We are hearing out here in California that produce prices are going to skyrocket due to the extended drought, and the fact that the State Water Board (or some other governmental body which I don't remember right off the top of my head...sorry) ruled that the amount of water that can be moved to the rest of the State from the Sacramento Delta has to be slashed to protect an endangered fish.

My city has already seen restrictions on lawn & home garden watering. The Central Valley and Imperial Valley could be very hard hit, since most of the irrigation water for those agricultural areas comes from the Sacramento River Delta area.

And the weather weenies are forecasting another very dry winter for Califormia. Yipeeeee.

[SundaySous]

I think we are just starting to see the impact of bio fuels. Brazil uses almost it's entire sugar production to make alcohol fuel for cars and trunks. They are also using soybeans for the same purpose meaning they are exporting less.

Corn in the US used to produce fuel additives if not fuel itself is becoming more and more attractive to farmers. Meaning less production for wheat and more for corn.

Power cost may be impacting dairy. I understand Electric is a significant cost in dairy. I haven't seen it here but I am told some people are paying twice what they were 3 years ago.

[gfron1]

If harvests are down, how can shipping be up?

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My understanding of their explanation was that gas was playing a huge factor (but we saw those price increases a year or so ago). This new increase is due to the trucks being fuller. More is being shipped (much out of the country), so the trucks don't have room, so they raise their rates.

I know that I have a truck that does the LA to Houston run weekly (carrying just one pallet for me). My previous driver was charging me $195 per pallet. After a year of business he said that he only did "full trailer loads," which meant I was out of luck. My current driver (of 2 years), has kept the price the same but I've been watching his trailers get fuller. He started with 1 trailer, now he has 2 and they are almost at capacity. And the math is easy...stop 20 times per trailer to make deliveries, or make 1 stop for a single delivery. In other words, supply and demand.

[SundaySous]

Interesting article about biofuels impact on prices. Bio Diesel made with soy beans is gaining ground so thankfully that isn't used in any food products, (kidding). Bio Diesel's exhaust has the added benefit of smelling like popcorn cooking. Can't wait till they start using that here, (kidding again).

[kitwilliams]

Driving across the country last month we saw nothing but corn growing, from Buffalo, NY to California. No "amber waves of grain" anywhere I expected them to be. We heard that Western NY is getting into the ethanol biz in a big way and we were pleased to hear that as it is a beautiful part of the country whose economy needs that boost.

But we were concerned then and even more so now, having read THIS article about the rising price of wheat. Farmers switching to corn (and we don't have enough ethanol-run vehicles to utilize all that is being produced), not enough wheat being grown, weather affecting the wheat crops and cultures who used to rely on rice alone are using more and more wheat. This article states that world demand for wheat is so great that "record crops" are required to keep up to demand. Very scary.

Interesting topic. As a baker, it will be interesting to see how this affects mass produced bread/pastry as well as our local artisanal products.

[MSRadell]

The way Bio-Fuels are being approached in the United States is plain stupid! We're using corn kernels to make ethanol to fuel our cars, the kernels are only about 5% of the total plant. Using sugarcane like Brazil does makes much more sense since the entire plant is used.

Brazil itself used very little sugarcane domestically so utilizing it to make fuel helped prices their domestic economy and raised export prices. Both of these were good for their economy. The United States uses much of its corn for animal feed or other products that are utilized domestically thus diverting corn for another use only hurts prices for their consumers. Soybeans use for Bio-Diesel is much the same especially in regards to only using a small portion of the plant.

The fuels being approached like they are being in the United States only hurts our overall economy. Granted it's a benefit to a few small sectors but it's detrimental to the economy as a whole.

We need to pursue other sources of energy that we have a large quantities (Coal and potentially Nuclear) as well as other renewable sources such as Solar, Hydro, Wind and Geothermal in order to ensure our economy remains strong.

[Bree20]

We are hearing out here in California that produce prices are going to skyrocket due to the extended drought, and the fact that the State Water Board (or some other governmental body which I don't remember right off the top of my head...sorry) ruled that the amount of water that can be moved to the rest of the State from the Sacramento Delta has to be slashed to protect an endangered fish.

My city has already seen restrictions on lawn & home garden watering.  The Central Valley and Imperial Valley could be very hard hit, since most of the irrigation water for those agricultural areas comes from the Sacramento River Delta area.

And the weather weenies are forecasting another very dry winter for Califormia.  Yipeeeee.

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You should be here in the upper part of Georgia, according to reports and the gov. we will be out of water in 3 months! No successful rainfall all year.

They are only allowing a certain amount of water from our source here in the Atlanta area that goes into the community because of some federal protected fish that are off the gulf that need the water more than people (according to the US gov't)!

Our farmers are suffering in some area and prices are getting up there and people are starting to feel the effects.

[helenjp]

Here in Japan, the gourmet shochu (a distilled rice spirit) boom has affected the availability and price of sweet potatoes.

For years I've been using sweet potatoes as a substitute for rice (to which I have a low-level allergy), but this year, there have been times when I can't find any in the shops.

At least the shochu boom has made sweet potato too expensive to be used as biofuel! Biofuel in Japan is mostly made from imported palm or jatropha. Rapeseed is about the only domestically grown crop likely to be used for biofuel, and world prices for rapeseed, soy, and corn oils have already caused a 10% rise in the price of Japan's well-known traditional condiment, mayonnaise. This was the only food-price increase that received major media coverage this year!

We are also told that natto and tofu made from "premium" domestic soybeans will go up in price, because a rise in the price of imported soybeans "necessarily" causes a rise in the price of premium-quality domestic beans, because the price premium is linked to the price of the standard product. I wonder how widespread this kind of thinking is?

[SundaySous]

We need to pursue other sources of energy that we have a large quantities (Coal and potentially Nuclear) as well as other renewable sources such as Solar, Hydro, Wind and Geothermal in order to ensure our economy remains strong.

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The UN special rapporteur on the right to food, Jean Ziegler wants a five year ban on biofuels.

Within that time, according to Mr Ziegler, technological advances would enable the use of agricultural waste, such as corn cobs and banana leaves, rather than crops themselves to produce fuel.

I think the solution is to implement the use of the methane gas this agri waste produces. Something like having the US postal service use it would be a good way to show it's feasibility. I don't think I've ever seen a postal vehicle go over 30 MPH in an urban area. If memory serves me methane powered vehicles would be lucky to get 30 MPH.

It's going to be a whole new world when we start paying $7 a gallon for gas so we can drive to the market and pay $6 for a loaf of bread and $12 for mayo. Maybe we should start experimenting with corn stalk recipes, sounds like there will be plenty left over.

[Pierogi]

You should be here in the upper part of Georgia, according to reports and the gov. we will be out of water in 3 months!  No successful rainfall all year. 

I know, I've been watching the Southeast's drought as well, since its so very out of the norm for your area. We're sort of used to the cycle of dry years/wet years, but this is so atypical for you guys.

And, BTW, get your fill of California avocados now. The fires last week wiped out a significant amount of the avocado crop around San Diego. Cut flowers and flowers for seed as well.

[helenjp]

So, a couple of months on, are you seeing the expected price increases?

Today's newspaper in Japan announced a 20-30% increase in the government-set price of flour, in addition to a 10% rise in October.

With rises in edible oil prices, retail prices for all kind of baked goods (including instant noodles) have been going up...

Noticing price increases of staples such as flour and oil at retail level in your part of the world yet?

[gfron1]

If anyone is interested in further reading on this topic, the Economist had a fantastic and understandable article on the subject last week.

[MSRadell]

So, a couple of months on, are you seeing the expected price increases?

Today's newspaper in Japan announced a 20-30% increase in the government-set price of flour, in addition to a 10% rise in October.

With rises in edible oil prices, retail prices for all kind of baked goods (including instant noodles) have been going up...

Noticing price increases of staples such as flour and oil at retail level in your part of the world yet?

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The biggest cause of the rise in food prices is not directly related to the price of oil. Rather the main cause is the stupid idea that the U.S. can use ethanol made from corn to solve the energy crisis! Corn prices have skyrocketed and farmers have switched from wheat, soybeans and other staple products to corn to cash in. This has caused a shortage in the other commodities so their prices are also increasing dramatically.

There are many more practical solutions to the energy crisis that will not cause such dramatic increases. In a short term coal (including coal gasification) and ethanol made from a more suitable products such as sugar cane that provides over 75% of the fuel needs for Brazil. In the long term Hydrogen powered fuel cells are a very clean and efficient alternative. The supply of Hydrogen is unlimited and the electricity required to perform the electrolysis can be generated from nuclear power, another clean and plentiful source of power.