Bread Prices Soar but Who or What's to Blame?

May 1, 2008— -- When Sen. Chuck Schumer, D-N.Y, held up a loaf of light wheat Pepperidge Farm bread at a hearing on Capitol Hill Thursday and said his family is spending $40 more per week on groceries this year than it did last year, he admitted that they can afford it. But many Americans cannot.

"We buy this light wheat bread, like this loaf here," he said. "We're paying almost four dollars."

That figure is up from about three dollars a year ago. But Congress heard very few easy answers for what has caused that dollar increase in bread prices, and no agreement on what should be done about it.

Food Prices on the Rise

Rising food prices are causing unrest in developing nations and making life difficult for low-income Americans. But while the effects of the prices are evident, the causes are not.

Lawmakers heard from a baker who said the cost of his wheat has more than tripled in the past year, leading to pricier bread and layoffs at his bakery.

He questioned why the government is still encouraging farmers to produce corn for ethanol and energy when the prices of food are so high.

"Why are we putting food in our gas tanks instead of our stomachs?" asked Richard Reinwald, owner of Reinwald's Bakery in Huntington, N.Y., and an active member of the Retail Bakers Association.

Tom Buis of the National Farmer's Union countered, "To make the allegation that corn is taking food out of people's mouths is a real stretch."

Buis, a former farmer and now lobbyist for farmers, said the high price of wheat has more to do with the price of oil and bad worldwide weather in wheat-growing regions last year that has dwindled world supply of grain.

Farm-state Sen. Sam Brownback, R-Kan., agreed with Buis.

"I'm sorry about the price of your bread," he said to Schumer. "But the amount of wheat in that bread isn't much."

Brownback pointed to the weak dollar as a reason for the higher food prices. But he argued that a weak dollar is not all bad; it has, he said, improved farmer's ability to export their crops.

Blame for Bread Costs

At a press conference elsewhere on Capitol Hill, Sen. Charles Grassley, R-Ia., was also defending the ethanol industry from those concerned about the cost of food. And, like Schumer, he had props.

"Take one of these kernels here and chew on them," Grassley said at the press conference, waving a hard yellow ear of corn of the type used for ethanol, its husk peeled back. "It's not something you can sit down at your table and eat."

Buis told the committee they should take steps to lower energy costs if they want to lower food prices in the short term.

Joseph Glauber, the chief economist at the Department of Agriculture, said ethanol production has led to higher prices for corn and soybeans, but not for wheat.

"While much of the increase in the farm prices for corn and soybeans can be attributed to increased biofuels production, other factors have also contributed to the sharp increase in prices for these commodities. The strength in exports resulting from global economic growth and drought and dry weather in some major grain producing countries has boosted prices for corn and soybeans," he said.

Glauber predicted that commodities prices will stay high for the next several years.

Meanwhile, the price of bread is unlikely to fall any time soon. And this is having an impact not just on the people who buy their bread from Reinwald. He has had to reduce the amount of bread he produces and has stopped giving away old bread to the local food bank.

"The food pantry that has come to rely on our production overruns and therefore is now short of food when demand is higher."

Reinwald is not the only person curtailing his contributions.

George Braley, the vice president of America's Second Harvest, said food banks nationwide are having trouble stocking their shelves.

He pleaded with committee members to pass the long-stalled Farm Bill, which has fallen prey to partisan bickering over tax provisions and which farmers should receive government subsidies.

"We need to buy more food, but the money is not there," Braley said.