The price of bread
National Radio had an item on the rising price of bread this morning. Much of the reason given was droughts in Australia and overseas use of crop land for biofuels. Now, bread should be something that we are able to supply relatively easily. After all it’s mostly made from things we should be able to grow here, wheat and milk. So it seems slightly absurd that its price should be driven by hot dry weather conditions in Australia. But that’s the great thing about unrestrained international markets I guess.
However a later news item, also on Radio New Zealand, has a farmer challenging the assumption that flour shortages were driving prices up:
[A] mid-Canterbury grain farmer, Edward Oakley, says the flour component of a loaf of bread is a very small part of the overall cost.
And he says millers are still using wheat contracted last year, when world prices were lower.
So, if it’s not overseas wheat prices that are currently driving bread prices and it is not yet the cost of raw products coming off New Zealand farms, then something must be happening to the price of bread as it passes through either the bakeries or our supermarket duopoly.
March 28th, 2008 at 2:47 pm
I think the downwards trend in world food aid shows that we might also be close to what I suppose you could call “peak food”. Since oil has been used as an energy source, we have been living on free energy (I say free, because it only used a small land area as a point to draw it out of the ground). This free energy is almost gone and it would seem that the prefered energy source will come from growing it in the form of plants.
If we wanted more energy from oil, we just pumped it out faster (with no extra cost in land area), but if we want it from plants, we have to wait for it to convert energy from the sun (which we can’t get to burn any faster). So the only way to get more energy is to grow more fuel, which now costs us more land area. The same land we grow our food on.
I’d say the mentality behind raising bread prices might be the same reason petrol goes up before the price of oil does.
March 30th, 2008 at 5:40 pm
Why on earth should bread have milk in it? Bread is wheat flour and yeast.
March 31st, 2008 at 8:43 am
As always, there is not one single cause for rising food prices. DougT in several posts has noted the underlying causes are resources running out, combined with overpopulation. However, on top of these factors, which lead to an increasing price over time, the price is also modulated by other things such as competetition (or lack of it).
Personally, I think it is important to address the underlying causes of food shortages (overpopulation and diminishing resources), the other things are just details in the bigger picture.
The same thing applies to petrol. People whinge and moan about the price of petrol, and believe the oil companies are in collusion with each other to keep the price high (compared to the recent past, not compared to the future price). This may be true, but the underlying cause is that 6+ billion people are rapidly depleting the resource, and no amount of competition will ever make oil cheap again.
March 31st, 2008 at 9:28 am
i assume if flour is not a big part of the cost of bread, energy is.
anyway, although established bakers might be getting flour at old prices, they are at least aware that new competitors, or expanded production by existing competitors, would require higher-priced flour.
March 31st, 2008 at 10:51 am
NZ imports most of its wheat from Australia at market prices as the climate is too damp here IIRC. The canterbury plains and parts of the Waikato are about the only places suitable, and they are being converted to irrigated dairying at a huge rate.
The increase in basic food prices, especially dairy has been fast and brutal on the poor and fixed incomes. The dairy companies don’t give a stuff about the nz public suffering hardship as a result.
From The Press:
“New Zealand produces about 30% of its milling wheat, with the rest imported. The latest Australian price for standard-grade white-flour wheat is slightly over $A600/t ($NZ693/t). Farmers believe this is closer to $800/t once freight and cartage is added.
If prices rise to $700/t, the wheat share of bread prices is expected to increase from 18c-20c a loaf to 40c to 42c a loaf.”