I'm borrowing part of a headline from one of our stories that appears in this month's issue. Although in this case, I'm not referring to the article on dough conditioners. I'm talking about the commodity crisis. Who or what is to blame and what can be done about it?
According to a recent Wall Street Journal article entitled “Grain Companies' Profits Soar as Global Food Crisis Mounts,” the blame game continues. The Journal reports that companies that make value-added products from grain, such as flour and vegetable oil, are netting huge profits, while food manufacturers who are one step up in the theoretical food chain are struggling. In an effort to avoid what the article refers to as a “public image problem,” grain processors are defending their strategy by citing ways in which these profits might be funneled back into R&D for development of crops with higher yields.
So, the latest finger pointing for the current state of baking ingredient costs has turned to the grain processors. But, when will this blame game end and a solution begin?
We've heard all the causes before: growing global demand for grains, supply shortages because of demand and adverse weather conditions, subsidies for ethanol production leading to increased use of land for ethanol crops, index-fund investment and futures trading, high oil prices, the weak dollar leading to increased exports, the government's unwillingness to release land used for conservation, and so on.
While some baking companies have been able to cope in the current economic environment, others have struggled. Should we blame grain processors for reportedly making a profit, if they're pricing their products according to what the market will bear? I can't answer that, but I'll be curious to see where the finger points next month.
We know by now that there is not a “one size fits all” solution. Some bakers have been able to pass prices along to consumers, while others are cutting costs and hedging their commodity purchases.
It seems the government could provide some relief by easing penalties on land released from conservation and eliminating or sharply reducing subsidies for ethanol.
We aren't seeing an end to the current crisis. Just lots of blame going around without any viable solutions.