high prices are hurting local businesses

Oil isn’t the only commodity inflicting sticker shock these days. Wheat prices have increased dramatically over the last year, leaving many local business owners struggling to adapt.

For Me & Ollie’s owner Roger Elkus, the price of wheat has more than tripled in the last three months. He use to pay $11 for a 50-pound bag of wheat, but lately, he has had to shell out around $30 per bag.

Unlike larger bakeries, which buy their wheat a year in advance and therefore enjoy a set price for the entire year, Me & Ollie’s purchases flour as the need arises. The price they charge for a loaf of bread reflects the most recent price they paid for a bag of wheat. “Unfortunately, because we’re small, we have to react pretty quickly,” Elkus said. When the price of wheat is up, Elkus charges more for bread. Eventually, the bigger bakeries will change their price, too. “They let the little guys pave the way for sticker shock, so they can kind of ease their prices up,” Elkus said. “We have to go in unprotected.”

The U.S. and parts of Canada remain the world’s largest producers of high quality, high protein wheat. But in recent years, Russia, Australia and parts of South America have emerged as alternatives to the North American market. The growth of these markets has paralleled the rising demand for wheat products in places like India and China, where economic development has created a burgeoning middle class with a taste for western foods. 

Up until recently, Australia and Russia have been able to meet the Asian demand. But recent droughts in parts of Australia and poor conditions in Russia have devastated the wheat harvests in those two countries. As a result, wheat hungry countries in Asia and elsewhere are turning back to the United States. The added demand on America’s limited supply has helped drive up the price.

In previous years, U.S. wheat producers may have been able to absorb the increased demand, but lately, supplies have been unusually low. For years, farmers have been paid by the government not to grow wheat. A large percentage of the wheat grown on American soil goes into the mouth of meat producing animals (the Chinese have also developed a taste for meat). Recently, the federal government has been providing incentives to farmers to grow corn, which is being used to fuel the ethanol craze.

The U.S. still has more amber waves of grain than any other country, but with supplies low and global demand high, prices have skyrocketed. It’s the perfect storm, and several local businesses that depend on wheat find themselves right in the middle of the turbulent sea.

Another local business that is feeling the squeeze is Flatbread, a pizza company with restaurants in Portsmouth and six other locations. “There is no way around us buying flour,” said Chris Stone, who works in the kitchen of the Portsmouth restaurant. They use all organic, non-bleached flour, which is more expensive than most flour more commonly used.

“We probably feel it less because we are a larger company, but it definitely reflects in our food costs. The price has doubled in the last year,” Stone said. Flatbread has been able to keep its menu prices stable, but if wheat remains costly, that could change. Stone has friends embedded throughout the Seacoast restaurant industry. Their friendly network has been buzzing with wheat talk. 

For grocery stores, the high price of wheat hasn’t posed as much of a challenge as the price of oil, but the trickle down affect has been noticeable. “It’s not as dramatic as the ongoing increases overall,” said Phil Philbrick, owner of Philbrick’s Fresh Market. His customers have noticed some price increases. “It doesn’t stand out beyond anything else, but it has had a huge impact on bread bakers,” Philbrick said.

On March 12, a group of professional bakers, the Retail Bakers of America and the American Bakers Association marched on Washington, D.C., to voice their concerns. They met with officials, emphasizing that the current crisis affects the “big guys” and the “little guys.”

In order to survive, a number of businesses have developed a niche in the local market. Flatbread has embraced using organic wheat, which customers understand will be more expensive.

Me & Ollie’s has emphasized the close connection the bakery has with its wheat supplier, a farmer named Bob, who lives in Big Sandy, Montana.

Earlier in the week, Elkus was on the phone with his wheat farmer. “Globally, there has been a significant increase in demand. Everybody is waving dollars at the farmers. And it’s about time. They work hard enough,” Elkus said.    

For Bob Duston, owner of Duston’s Market & Bakery in Dover, the price of wheat has doubled in the last three months. “We’ve had to pass that cost on, reluctantly, but it’s out of our control,” he said. He blames the high price on the shift to corn and the poor crops in Australia. “A lot of places are talking $40 a bag,” Duston said. Like Elkus, he pays around $30 for a 50-pound bag.

“I’m told that it’s going to be a while before it comes back down. They’ll have to wait for a new crop to come in, which will be in late spring, and then see if the crops after that are showing signs of improvement,” Duston said.  “That’s the way it is. Business cycles in and cycles out. Two years from now, it might be different.”

At Me & Ollie’s, the cycle has never been worse. “We’ve been doing this for a little over 10 years. I would say that this is the most challenging it’s ever been for us. When I was talking to our farmer, I asked him ‘do you remember a time like this?’ And he said no,” Elkus said.

While prices remain high, local business will have to continue to adapt. That might mean discontinuing certain products or raising prices on the staples. “Personally, I don’t see significant price reductions for food or fuel,” Philbrick said. But business owners plan to persevere anyway. “All in all, the profit will probably go down noticeably, but we’ll try to push through this recession,” Stone said.