Why You Will Pay More for Bread, Pasta

Rising demand for ethanol is sending wheat prices through the roof.


Feb. 20, 2008— -- Bakery owner Pam Weeks counts every pinch of flour and watches every penny.

"It's just unbelievable how much the price of flour went up overnight — literally," said Weeks, who runs Levain Bakery in New York City.

Just a few weeks ago, 50-pound bags of flour cost about $15. Today, they're $40.

"You try to figure out ways to cope, but it's to the point now where we are going to have no choice. We're going to have to raise prices," she said.

Blame it on the price of wheat. Demand for alternative energy has farmers planting less wheat and more corn, the key ingredient of ethanol. According to the USDA, since 1997, the amount of farmland dedicated to planting wheat has dropped from 70.4 million acres to 60.4 million, while corn acreage has risen from 79.5 million to 99.6 million.

Add to that the growing appetite for wheat from developing countries, and the supply is strained.

U.S. wheat stockpiles have hit a 60-year low, and wheat prices have never been higher, which means pasta prices have doubled. And that loaf of bread will cost you an extra 20 cents. Economists say food inflation is as high as it has been in nearly 15 years.

The price spike is being felt across the globe. In Italy, the cost of pasta is spiraling — up 20 percent since September. Malaysia no longer allows anyone to take flour out of the country. And in Pakistan, they now stockpile wheat and use their military to guard flour mills.

"As long as this strong foreign demand continues — as long as the demand for ethanol continues very rapidly ... there just doesn't seem to be any end in sight," said Vic Lespinasse, a grain analyst with Illinois Grain.

This puts wheat farmers, like Joe Kejr of Kansas, in the unusual position of being in the driver's seat.

"It's real exciting to see where prices are. Prices I haven't seen in my lifetime," Kejr said.

With the world's hunger for ethanol changing the landscape of America, Weeks said she wonders at what price it will curb our appetite for wheat.

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