Skyrocketing wheat prices costing the nation’s bakers lots of dough

The weather and the dollar are some of the reasons to blame.

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A third-generation baker, Rob Lederman has endured periodic price surges for many of the ingredients that go into Bluepoint Bakery’s rolls, pastries and other baked goods. But he’s never seen anything like the run-up in the cost of flour in the past three months.

“Commodity flour is out of sight,” said Lederman, who co-owns the Denver wholesale bakery.

Bluepoint’s flour costs jumped $7,000 in August alone, he said. The increase is for every type of flour, from specialty rye to the bread and high-gluten flours used in the bulk of Bluepoint’s loaves.

Bakeries are businesses that run on razor-thin margins, so every price increase in ingredients hurts.

Under the weather

As anyone who shops for groceries knows, prices have jumped for everything ranging from pork loin to orange juice this year. The surge in the cost for flour and other grains, however, has become breathtakingly steep in recent months. On Sept. 28, wheat futures hit a record high of $9.62 a bushel on the Chicago Board of Trade, more than double the year-earlier price of $4.47.

Blame the spike on a biblical bout of bad weather in wheat-growing regions, a weak dollar that makes American wheat cheaper overseas and — to a lesser degree — farmers shifting their crops to corn to produce ethanol, economists said.

A freeze followed by hard rains decimated crops in Kansas and Oklahoma, while the wheat belts of Canada, Australia and eastern Europe suffered droughtlike conditions. Colorado is practically the only wheat-growing region that produced a bumper crop, but nearly 80 percent of the state’s harvest is exported.

The last time the wheat market experienced a similar spike was during the 1970s, when it was buffeted by the oil shock, opening of the U.S. agricultural markets to world trade and the plummeting dollar, said professor Stephen Koontz, an agricultural economist at Colorado State University.

While many of those factors are similar to what’s going on now, “what’s different this time is higher energy prices appear to be here to stay,” he said.

Bright side

Nationwide, bakers are raising prices. Sara Lee said last month it raised the prices of its own bread and bagels by 5 percent and the cost of what it bakes for private label customers by as much as 7 percent. Interstate Bakeries, which makes Wonder Bread and Hostess Snack Cakes, also has acknowledged raising prices but hasn’t disclosed an average.

The weather that wiped out much of the world’s wheat crops decimated other grains, including barley, which is a key component in beer. Prices for malted barley already have gone up around 30 percent for some brewers, said Paul Gatza, director of the Boulder-based Brewers Association, and “we’re hearing word of 100 percent next year.”

Barring another disastrous wheat-growing season, some relief might be in sight. The record-high wheat prices likely will lure more farmers to plant wheat instead of corn, which can be used to make ethanol. Also helping matters is a 30 percent slide in the price of ethanol since May, with the plunge accelerating in recent weeks. The sharp decline is blamed on a glut of ethanol distilleries, causing an oversupply of the biofuel.