Just Grounds Community

Real People - facing the forgotten issues with friendship and a little fun.

Wheat & the price of bread.

For all that have complained, commented, whinged and well, complained in amazement at the price of bread, here are some numbers from our friend Kevin Hursh in Canada:

Bread price fallacy

Last week, the price of wheat made national headlines. Drought in the Former Soviet Union has been pushing wheat prices higher. When Russia announced a temporary ban on wheat exports, the market spiked last Thursday and that’s when much of the media attention was generated.

Some of the media reports felt it necessary to delve into what this means for consumers and the poor people of the world. One national television report said the price of a loaf of bread could increase by 30 cents. That’s extremely inaccurate.

The Canadian Wheat Board has released some statistics to set the record straight. First of all, the value of wheat accounts for less than 10 per cent of the cost of a loaf of bread. A bushel of wheat makes about 67 standard loaves. At a wheat price of $4.50 a bushel, there is about 7 cents worth of wheat in a loaf of bread. Wheat futures on Thursday spiked to over $8 a bushel. At that price, there’s still only 12 cents worth of wheat in a loaf of bread.

That five cent increase is a far cry from the 30 cents reported.

It should also be noted that wheat fell back sharply on Friday and the price was little changed yesterday.

I’m Kevin Hursh.

Now, hands up who has a counter argument.

Roger

Replies to This Discussion

Permalink Reply by Colin J Ely on August 10, 2010 at 10:53pm

On the SBS program 'Insight' tonight, it was asserted that the price of groceries has not risen, and has even fallen.

Permalink Reply by Roger Rankin Crook on August 10, 2010 at 11:03pm

Yup. Prices go down and farmers go broke!

Permalink Reply by Grant Piper on August 11, 2010 at 8:23am

I'm selling EU steers for AUD$3.55 per kilo dressed weight, even with 25% wastege for meat and trimmings, that's less than $5/kg for the saleable meat. And I pay the freight to the abottoir and the statutory levies out of that. Compared the to the current sheep meat prices (to the producers), there isn't the same differential in their respective retail prices. How is supply and demand meant to work if the price/cost signal isn't seen by the consumer? By rights sheep meat should be a lot dearer in the shops, or beef should be a lot cheaper. If they were, substitution would occur and consumers would move to beef or another cheaper form of protein. It seems the retail price of food bears no relation to the price paid to the producer these days.
Roger, you make the classic, and understandable, mistake of assuming that because grocery prices go up it means farmers will make more! Throughout the drought consumers were told the cost of groceries would rise, but in the same period prices to farmers fell and our costs increased. Now it is raining consumers are told that farmers are restocking, reducing stock numbers going to sale, and thus prices will go up! The reality is, again, that prices to us are static or falling (in nominal terms, I don't want to think about 'real' terms!).
So where does the consumer dollar go? To the middle men and the supermarket duoploly, and they play both sides against each other. Look at the recent Coles decision to not buy pork from Australian producers who use sow stalls. Yet they will import and sell pork from countries with no such rules.
The double-standards and double-speak in our country is staggering.

Permalink Reply by Roger Rankin Crook on August 11, 2010 at 11:53am

Grant,
Roger, you make the classic, and understandable, mistake of assuming that because grocery prices go up it means farmers will make more!

With respect I made no assumptions at all. Your comments are patronizing in the extreme.

I faithfully reported what Kevin had written and commented on returns to growers. I then made an acerbic comment on the fate of farmers. I probably see more farm budgets in a month than you see in a lifetime.

I know better than most what is going on out there. I didn't spend fifty years doing it myself and at the same time, walking round with my eyes and ears closed.

If you want to read my views trawl back through Think Tank and Food and Fibre and you might, if you can comprehend, just get the tip of the iceberg on what I think.

The relationship between supply and demand for food and so price, if you read what I have written about wheat, does not exist. Neither does it for beef. Who is to blame? The man who sells or the man who buys?

But then you could read what I wrote about Minnesota Farmers Coop and what they have done and are still doing, for themselves.

Follow their lead if you have the intestinal fortitude.

Farmers, the growers of food, are as strong or as weak, as they want to be.

Roger

Permalink Reply by Rae Billett on August 11, 2010 at 8:44pm

I saw that Col, if she (whoever she was from the Retailers Association) says it often enough, I suppose some people might believe her.

The poor bugger who stated that he was finding it harder and harder to keep up with grocery prices and knew that his wages hadn't risen up in accordance with the price of food wasn't convinced though. And neither am I.

You can't eat TVs or PCs and you only need so many clothes to wear, we eat all the time. I missed the first bit so I have to assume she was speaking about retailing overall. If she wasn't, I wonder who is doing her grocery shopping? It can't be her.

She kept the supercilious smile of her face though. There is a name for women like her.

Permalink Reply by David Beale on January 31, 2011 at 6:05am

Roger,

I thought I was ascerbic!

Market-wise, anything other than monopoly producers will be price-takers, or will tend to that.

Unfortunately, and not to patronize regards the pretty much self-obvious, they - farmers/ graziers-ranchers - also produce within an ambit and arena whereby life, lifestyle, costs of maintenance, and simple lack of a capacity or capability re either area, fodder reserve, or financial capability to hold back on the productive outputs of their endeavour will force them to sell and take a price. The further fact that major farm/grazing [some, and perhaps significant proportions of these] enterprises may be held by secondary or tertiary output producers - professionals, mine enterprises - to whom development and other tax [loss] provisions may well be the the underlying and primary rationale to enterprise will also veer an industry to the forced taking of prices, to the point that it goes down this way, ie., price-taker, not price-maker, in the overall level of where it stands, and this is before the facts that markets ARE manipulated, and not to the betterment of the producer.

B A R

Roger Rankin Crook said:

Grant,
Roger, you make the classic, and understandable, mistake of assuming that because grocery prices go up it means farmers will make more!

With respect I made no assumptions at all. Your comments are patronizing in the extreme.

I faithfully reported what Kevin had written and commented on returns to growers. I then made an acerbic comment on the fate of farmers. I probably see more farm budgets in a month than you see in a lifetime.

I know better than most what is going on out there. I didn't spend fifty years doing it myself and at the same time, walking round with my eyes and ears closed.

If you want to read my views trawl back through Think Tank and Food and Fibre and you might, if you can comprehend, just get the tip of the iceberg on what I think.

The relationship between supply and demand for food and so price, if you read what I have written about wheat, does not exist. Neither does it for beef. Who is to blame? The man who sells or the man who buys?

But then you could read what I wrote about Minnesota Farmers Coop and what they have done and are still doing, for themselves.

Follow their lead if you have the intestinal fortitude.

Farmers, the growers of food, are as strong or as weak, as they want to be.

Roger