Rising wheat prices hit bakers hard

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It's now to the point that Lynn Schurman posts in her bakery the latest price for wheat, just so her customers understand. "We're not doing this because we want to," she said of the price hikes on breads and rolls at her Cold Spring Bakery in Cold Spring, Minn. "We're doing it to survive."This is the other story to spiraling wheat prices, where bakers have to contend with costs that in the past few weeks have jumped far beyond historic averages, far beyond anything that anyone could have seen coming. So high has wheat gone, in fact, that the latest traders newsletter at the Minneapolis Grain Exchange starts off with a question, "Is this really happening?"It is, but the sense of disbelief still comes each week to Schurman's bakery as she updates her customers on the inflation-racked wheat market that has her paying four times what she paid less than a year ago."Our customers, when we explain to them what's happening, they're understanding," she said.A bakers' trade association has become so concerned that it's organized a march on Washington later this month. Minneapolis shook the commodity world last week when a trader paid $25 a bushel for the high-protein hard red spring wheat that trades exclusively in Minneapolis and constitutes the main ingredient in most breads and muffins and pizza crusts. That's about five times the price of wheat a year ago, a run-up most blame on thin supplies and widespread speculation from fund managers. Schurman said she's raised prices 8 cents per loaf after her costs climbed from $33 per hundred pounds of unbagged flour to $45 to $50. A year ago she paid $12.65. With egg and shortening costs also up, she's expecting to raise prices 25 percent overall. No one's looking forward to buying wheat: "It's almost a little more frustrating because you know what's coming," said Dan (Klecko) McGleno, a baker at St. Agnes Baking Co. in St. Paul. The wholesale business supplies hotels and restaurants. "In the last six months it's been spinning out of control," he said. He paid $8 for a 50-pound bag of flour last summer; now it's closer to $20. Prices for eggs, sugar and walnuts are up, too. He said many bakeries have slapped 10 percent increases on everything, but he fears raising prices too much. "Everybody's just riding it out and hoping for some relief," he said. Mervyn Hough, owner of A Toast to Bread bakery in St. Paul, said he first noticed food inflation last year when dried milk powder prices suddenly doubled."I do recall my surprise," he said. He recently raised prices. "I'm not going to demonstrate. I'm just going to work harder and hope for the best."He wasn't harboring grudges against the farmers, though: "I say congratulations to the farmers. It's about time they make some money. They work and work and work, and most of them, except when they sell their land, are hard up for life."Many analysts expect the elevated prices will moderate, though at least one expects volatility will get worse before it gets better. "This is not a long-term situation," said Tom Lehmann, director of bakery assistance at the American Institute of Baking International in Wichita, Kan. Prices should moderate with the July harvest of the winter wheat crop, he said. So far the price hikes have amounted to about 25 cents per loaf of bread, calculated Lehmann.It's hard on the thin margins of the baking business, and veterans of the baking industry recall the 1970s sugar pricing crunch, when bakeries went out of business after sugar prices spiked. This time may not be as painful, Lehmann predicted."What we're telling people is for God's sake raise your price. Just do it," he said. That's one strategy: The other will take place on March 12, when Schurman, who will assume the presidency of the Retail Bakers Association this month, and others plan to lobby in Washington. The American Bakers Association, which dubs itself the voice of the baking industry since 1897, plans the Band of Bakers March on the Capitol, a lobbying effort that won't involve any actual marching ("We don't have enough members," lamented Schurman), but will have bakers meeting with the secretary of the U.S. Department of Agriculture and about 25 legislators. The group wants Congress to open up farming land idled under conservation agreements; it'll also lobby against ethanol subsidies, blamed for rising grain prices. (Distributed by Scripps Howard News Service, www.scrippsnews.com.)