A Recipe for Disaster
Date: 05/01/08
Author: Natalie Slater
For six years Starry Night Bakery has been Carroll County, Maryland’s go-to spot for award winning cakes and breakfast pastries. Owner Shannon E. Clarke’s unconventional wedding cakes and other sweet creations attract customers from Baltimore to Southern Pennsylvania but her patrons might soon be searching for a new sugar fix if the price of commodities maintains its recent increase.
A loaf of artisan bread now costs as much as a gallon of gas, and gas prices have never been higher. Flour prices have quadrupled over the past 18 months, driven by a barrage of bad news- crop-damaging weather in important wheat-producing areas, rising transportation costs, a switch from wheat production to corn for ethanol fuels, the weak American dollar and high demand from developing nations.
"When we first opened I was paying $8.45 for a 50 lb. bag of flour," says Clarke, "that same bag costs me $27.65 now." In response, bakeries like Starry Night have been raising their prices by degrees, but potential customer backlash limits price increases. To fully compensate for the rise in flour costs, Clarke says she would have to hike her prices as much as 150 percent. The alternative of switching to a lesser quality flour is also not an option. “I will shut down before I do that,” she says.
On March 12, 2008, baker's organizations pushed lawmakers in Washington to help find solutions. Over 80 bakers, representing businesses of various sizes, visited with more than 45 members of Congress and the key White House policy officials to urge immediate action on the American Bakers Association's (ABA) Three Point Plan to alleviate the commodity crisis. “ABA and its members have been warning government officials about the pending crisis for the past year; any further delay could have extremely serious consequences,” ABA President and CEO Robb MacKie said in a press release.
The USDA currently allows up to 39.2 million acres of cropland to be enrolled in the Conservation Reserve Program (CRP), a program that subsidizes farmers to idle their lands to restore the environment. Because a significant portion of CRP acreage is located in large wheat-producing states, the Three Point Plan includes early release of some of this land, which would restore about one-third of the farmland currently idled. The plan also calls for elimination of the ethanol import tariff and a USDA review of wheat export policies. Proponents of the plan believe releasing non-environmentally sensitive lands, balancing alternative fuel research with the needs of traditional agriculture and pushing to increase U.S. wheat stocks will relieve the current pressure on our food prices. While he considers the March push a success, MacKie urges bakery owners to continue to write letters and make phone calls to policy makers.
In the mean time, Commissary Manager and General Director of Quality Control for Paradise Bakery and Café Alexis Carroll says her company has taken steps not to pass expenses on to the consumer. Flour that cost $16 per bag a few months ago is up to $33 a bag now. According to Carroll those prices fluctuate as much as gas prices, so the Arizona-based company stocks up on flour when the prices dip. To cut back on waste, and in turn on a need for excess flour, Paradise Bakery concentrates its efforts on productivity and precision. “We're always on our employees to make sure we are getting the product right the first time,” says Carroll. Acknowledging her company's good fortune in having the space to store flour in quantity, Carroll wonders how the “little guy” is making it through the crisis.
Back at Starry Night Bakery, Clarke says she's had to explain her price increases to a few customers, but all in all they've understood. “They give me an 'I'm sorry for you' look,” she says. Smaller portion sizes and a commitment to quality are Starry Night's salvation at the moment, and Clarke hopes her loyal customers will ride out the current economy long enough to celebrate her seventh year of business.
Bakeries worldwide are feeling the crunch, from American chain Panera Bread to independently owned Just Cupcakes in Australia. Owner and head baker Juli Stertern-Gill says her business, which opened less than one year ago, is already suffering from high flour, butter and chocolate prices. As a result, she says she has started shopping “price-focused” for the first time, especially for butter. Stertern-Gill says high commodity prices have forced her to focus on waste reduction, which in turn, limits the amount of experimenting she can do with her recipes. Unwilling to sacrifice in the quality of products she bakes with, the Aussie baker finds herself having to cut back on the flavors of cupcakes she offers, “I offer basic products, like butter cakes, that are 'schzoozed up' to look amazing.”
If you want an honest opinion of the current agricultural market environment, look in the mirror. Long-term effects of the crisis might only come to light for big time bakeries in the later half of 2008, But Starry Night, Just Cupcakes and even Paradise Bakery and Café are facing the storm now, hoping not to be reduced to rubble in its wake. Pride in their product, and rigid ingredient specifications were considered a recipe for success not too long ago, but bakers have to now wonder whether or not substitutions and reformulations are worth a shot. High gluten spring flour prices, for example, are well over $50 a bag, but a lesser grade sells for as little as $15 a bag. Substituting even a small amount of a lesser flour grade could have a noticeable impact on "the little guy”.
According to a USDA report entitled " USDA Agricultural Projections to 2017,” the wheat shortage is only temporary. "Stockpiles are predicted to fall this year to 312 million bushels, from 456 million bushels, before rebounding to about 700 million bushels by the end of the decade,” it says. Good news for the bakeries of 2017, but what that means to the rest of us remains to be seen.