In my world

27 August, 2010
Page 18 

David Powell, Deputy Master of the Worshipful Company of Bakers

If an event has received wide media coverage, the question is often asked as to where/which planet you have been on if you are not aware of it.

I have just returned from the frozen Arctic with no sight of a ship, plane or indeed habitation, let alone phone or email access for several weeks. But even I have heard the reports about substantial increases in raw materials such as a 20% increase in animal food prices leading to a 10% increase in food prices, and a British wheat farmer making a windfall £300,000 profit by selling 1,500 tons of 'yet to be harvested' wheat by selling it to a commodity broker, so hedge funds and the like can play the market.

Since Russia announced it was stopping wheat exports, the event which started this saga, the price of wheat has fallen from its peak by £25/ton and is still substantially lower than 2007. A national miller increases the price of flour by £89.37, which would equate to a 10p per loaf increase. The largest bakery retailer claims it doesn't envisage substantial rises driven by the price of wheat, due to high world stocks.

Even if you are not yet confused, you are undoubtedly worried about where all this is leading. I am no ecomomist or wheat expert far from it. But I sense that we are in for an extended period of price turbulence. While some of the issues noted above sound and are serious, in real terms they are minor blips on the longer-term world stage. The driving factors are world-scale: climate change; the drought that has reduced the Russian harvest, while perversely, flooding has reduced the US/Canadian harvest; the increasing use of agricrops to produce ethanol in a mistaken belief that this will help, yet if all of Europe's agricultural land went to producing ethanol, it would lower European oil consumption by a whole 10%!

Perhaps the biggest issue, though, is the change in diet of the 1.3 billion Chinese. As their consumption of meat rapidly accelerates forecasts predict a 35% increase by 2015 the demand for animal feed, primarily wheat and maize, will accelerate much faster. It takes 9kg of feed to produce 1kg of beef! Don't even mention water supply in this bigger picture, as there will be insufficient water long before oil stocks begin to run low.

So the trend in raw material prices is only going one way upwards! Please don't think the current increases can be ridden out or absorbed; food prices need to rise.





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