Dive Brief:
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Flour prices are up more than 25% during the past month for hard winter-spring blends and spring standard, accoriding to Food Business News.
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Higher prices and low protein content in the 2017 hard winter wheat crop have forced flour users to review their options. Some manufacturers are looking to add vital wheat gluten to improve the protein content of their flour while others are working with millers to blend it with higher-protein spring wheat.
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Meanwhile, the quality of the spring wheat harvest also has been poor because of weather conditions in some parts of the country, further adding to the woes being faced by manufacturers.
Dive Insight:
Food as a commodity is considered to be inelastic, meaning that demand doesn’t tend to change much even as prices rise. That’s because food purchasing makes up a relatively small amount of a household’s overall spending, and the cost of the flour in a loaf of bread, for example, is a relatively small part of the product’s overall cost. Even at $10 a bushel — which was last reached in 2008 — the cost of the flour in a 1.5 pound loaf works out to about 25 cents. Although prices have risen sharply in the past few months, they are still only about half of 2008 levels.
For manufacturers that use flour, dramatic price shifts certainly have an effect on business, and some of this inevitably is passed on to consumers. However, a change of a few cents in the price of a loaf of bread or a box of ready-to- eat cereal is unlikely to have a large effect on consumer demand in the United States.
It's a far cry from prices for a more volatile commodity like beef, or even gasoline at the pump, which can change quickly in price and be felt at the retail level in a matter of days of weeks. In theory, companies could stockpile supplies when prices are low, but this is neither practical — it's nearly impossible to know when prices have bottomed — and most manufacturers don't have the space to store the commodity for a long period of time.
What’s more, even with lower gluten levels in this year’s hard winter wheat harvest, some manufacturers have said it still bakes quite well, according to the Food Business News report. This could be promising by limiting the amount of vital wheat gluten that bakers will need to add to their recipes.