Biting Into Your Budget

Newsweek Web Exclusive

Email To A Friend

Please fill in the following information and we'll email this link.

SPONSORED BY

It better be, says grains expert Robert Bresnahan, president of Trilateral, a risk management firm, who estimates that the world needs five straight years of good crops to build up wheat stocks. "If we have crop failure anywhere in the world next year," Bresnahan says, "we'll have more political unrest and could have famine." What's clear is that the price spike revealed a long-term trend toward the Western diet—and food shortages. The developing world wants to eat like the rich, opting for meat, milk, and products made from wheat. That could cause some serious problems, since the typical Western diet puts much greater demand on land. A calorie from a cow or pig or lamb requires up to eight times as much acreage to produce as a calorie derived from grains, says Peter Timmer, a fellow at the Stanford University Program on Food Security and Environment.

Not everyone is losing money in the current crisis. After food giant Conagra tripled profits in its commodity trading business, the conglomerate sold the division last month for more than $2 billion. The company's milling division also enjoyed a brisk profit, even while the cost of the main ingredients was spiking. Some bakers, including Jim Greco, CEO of the national bagel franchise Brueggers, grumble that the millers passed along more than their own costs; defenders argue that millers are absorbing unprecedented volatility in wheat as well as higher delivery costs. (Flour travels by rail or in trucks running on diesel, which has doubled in price since 2006.)

While you wait to see if food riots and famine can be avoided, try to enjoy your (pricey) bagel.

« Prev Page

Member Comments

- Reply
- Report Abuse
Posted By: The_Doctor @ 04/29/2008 9:41:07 PM

Sorry about the repeated posts, guys... the system said it couldn't post my comments...
- Reply
- Report Abuse
Posted By: The_Doctor @ 04/29/2008 9:35:41 PM

The idea that they need to raise their bagel prices by ~17% in order to 'make up for' the rising cost of wheat is another case of common knowledge being dead wrong.

In one bagel, there is approximately 1/375th of a bushel of wheat. For those of you following along, that represents about 0.8 cents worth of actual wheat in the bagel when wheat is $3 a bushel. At $24 a bushel (a one-day high; wheat is back down around $9-10 a bushel) there is.... 6.4 cents per bagel worth of wheat. A rise of just over a nickel.

So your 15 cent increase....is 300% of the absolute worse case increase that can be attributed to the cost of wheat.

I'm ashamed of newsweek for not making the effort to debunk a junk statistic, especially since people will read this article, and make the same logical jump that newsweek did. You should be clear that the actual cost of the wheat in any baked product represents such a minor percentage of the total cost, that wide variations in wheat prices have very little effect on the final goods cost.
- Reply
- Report Abuse
Posted By: The_Doctor @ 04/29/2008 9:34:33 PM

The idea that they need to raise their bagel prices by ~17% in order to 'make up for' the rising cost of wheat is another case of common knowledge being dead wrong.

In one bagel, there is approximately 1/375th of a bushel of wheat. For those of you following along, that represents about 0.8 cents worth of actual wheat in the bagel when wheat is $3 a bushel. At $24 a bushel (a one-day high; wheat is back down around $9-10 a bushel) there is.... 6.4 cents per bagel worth of wheat. A rise of just over a nickel.

So your 15 cent increase....is 300% of the absolute worse case increase that can be attributed to the cost of wheat.

I'm ashamed of newsweek for not making the effort to debunk a junk statistic, especially since people will read this article, and make the same logical jump that newsweek did. You should be clear that the actual cost of the wheat in any baked product represents such a minor percentage of the total cost, that wide variations in wheat prices have very little effect on the final goods cost.