A reader contacted me recently about not having devoted enough attention to the commodity crisis that is so profoundly affecting not only the baking industry, but food processors as a whole. It is not my intention to ignore the situation.
Baking Management is dedicated to the wholesale baking industry, and as such, supports the industry in various ways, not all of which are obvious to the readers. We also assist the Independent Bakers Association (IBA) and the American Bakers Association (ABA), two critical lobbying groups for wholesale bakers, by informing our readers of their activities on Capital Hill.
I've taken some time, of late, to become better informed on a situation that Jim Hess of Horizon Millling called “the perfect storm.” Hess gave a very interesting and enlightening speech at IBA's winter meeting in Boca Raton, Fla. several weeks ago. As many of you know, world demand of wheat has outpaced supply. Six out of the eight top wheat-producing countries had weather related issues last year that resulted in lower crop yields. There also have been price incentives for farmers to switch from spring wheat to crops that generate higher prices, such as corn and soy.
What will it take to survive the current crisis? Our fate relies on the weather, notes Hess. The government also can help by releasing, without penalty, acres for spring wheat plantings that had otherwise been dedicated to conservation under CRP. In addition, it can curtail wheat exports for the interim. Will the government help? I wouldn't put my money on it.
What can bakers do in the meantime to offset higher commodity costs? Some are passing these costs on to consumers through price increases. I believe consumers will pay those higher costs. What else can be done?
Some companies are taking innovative measures to reduce costs. As Dave Harris, president of The Original Bagel Co. explains in our trends story on bagels this month, reducing the size of the bagel from 5 oz. to 4 oz. nets some savings.
General Mills cut the number of pasta shapes it uses in its Hamburger Helper meals in half, and its engineers found a way to nest the pasta bits so that the company could make the box smaller, as reported in Business Week, by Judith Crown, Feb. 21, 2008.
I believe that wholesale bakers can ride out the current storm with a little ingenuity.