April 22, 2008 / 7:43 PM / 9 years ago

Bakers feeling pinch of short supplies

WASHINGTON (Reuters) - Already feeling the pinch from soaring wheat and flour prices, U.S. bakers are now beginning to experience some supply shortages.

Rye flour stocks have been depleted in the United States, and by June or July there will be no more U.S. rye flour to purchase, said Lee Sanders, senior vice president for government relations and public affairs at the American Bakers Association.

“Those that are purchasing it now are having to purchase it from Germany and the Netherlands, and that’s very concerning,” Sanders said.

She attributed the shortage to high demand for rye flour, which is used to make rye bread, and less acreage devoted to rye grain than in the past.

Grain prices have been soaring worldwide while stocks have been dwindling, causing riots in some poor countries.

In the United States concern is also growing over food costs. The chief executive of Costco Wholesale Corp (COST.O), James Sinegal, told Reuters that the company is seeing some unusual buying with consumers stocking up as they fret shortages.

For bakers, rye grain is not the only supply stock that is declining. In the past the market has typically had a three-month surplus of wheat stocks to serve as a cushion against supply interruptions, but now the surplus is down to less than 27 days worth of wheat, Sanders said.

The American Bakers Association has been lobbying Congress to open up “non-environmentally sensitive” land in the Conservation Reserve Program for production to help increase supply. The group is also advocating elimination of the ethanol import tariff and temporarily waiving ethanol production limits.

“We need to make sure there is good balance between traditional agriculture and ethanol policies,” Sanders said.

With the supply issue looming, commodity prices are still hitting U.S. bakers hard.

“These are the worst price increases we’ve seen,” said Lynn Schurman, owner of a Cold Spring Bakery in Minnesota and president of Retail Bakers of America.

Schurman, who’s been in the bakery business since 1975, said the prices of all her ingredients have increased 5 to 25 percent. Flour has jumped 100 to 200 percent and continues to rise, she said.

Although Schurman said she has not experienced any supply shortages, she and her members are closely monitoring the supply situation.

“Right now products are out there, it’s a tight supply, but it’s there if you have money to get it,” Schurman said.

Editing by Russell Blinch and Jim Marshall

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