Dear Charlie,
I see US wheat growers made an interesting presentation to Washington... that well represents what is happening to us in Canada as well!
We need to get this information to the Canadian consumer... we are being cornered into an unsustainable situation economically!
"Wheat Industry Testimony to [the US] House Small Business Committee on Food Price Impacts
Statement for the Record from
David Cleavinger, President, National Association of Wheat Growers
and
Ron Suppes, Chairman, U.S. Wheat Associates
to the
House Small Business Committee
Hearing to Examine “Food Prices and Small Businesses”
May 16, 2008
Madam Chairwoman and Members of the Committee, we appreciate the opportunity to submit these comments on the causes and effects of rising commodity and food prices. We are sensitive to the concerns from bakers and consumers that rising commodity prices have affected the prices they pay for raw goods and food in the grocery store, but we also think it’s important to consider the issue from the perspective of the farmer who produces the commodity. This is especially salient for your Committee, since the vast majority of commodity producers are themselves part of small businesses.
What Has Caused Wheat Price Increases?
The historically high wheat prices we have seen recently are the result of a combination of factors including:
Strong competition for acres among crops in an environment where wheat is losing competitiveness.
Production problems including poor weather conditions in many wheat growing regions worldwide including the U.S., Australia and parts of Europe.
Global consumption exceeding production seven of the last eight years.
Increased world demand for food, especially high quality food including wheat products, from both larger world populations and a rising middle class in developing countries.
Domestic stocks at 60-year lows and world stocks at 30-year lows.
A weak dollar promoting increased exports from the U.S., which is the world’s largest wheat exporter and sells about half of its wheat crop overseas in a typical year.
Export restrictions by some countries, which have curtailed the world’s access to wheat.
Wheat competitiveness, highlighted in the first bullet point above, has been a particular concern for the wheat industry for a number of years. The decline in wheat acres in the United States is not a recent phenomenon spurred on by biofuels, as many would suggest. On the contrary, wheat acres have been declining steadily for decades; plantings are about 30 percent lower than in the 1980s.
Perhaps the largest single reason for this change is that the availability of technology, including biotechnology, in competing crops like corn and oilseeds has raised the opportunity cost of growing wheat. From the perspective of a grower, this means that the wheat market has to pay more to encourage plantings. The wheat industry agrees with some in the milling and baking industries who have said that the entire wheat chain is paying a huge cost for our failure to adopt new technology, like biotech traits.
Starting in 2006, NAWG and the North American Millers’ Association have led a series of “Wheat Summit” discussions with stakeholders throughout the wheat chain, including producers, millers and bakers, to discuss and find solutions to the competitiveness problem facing domestic wheat production. NAWG and U.S. Wheat Associates are actively working to create a market environment in which biotech traits in wheat are beneficial to producers, users and consumers.
What Impact Does This Have on Consumers and Food-Reliant Small Businesses?
Wheat, like any commodity, makes up a very small portion of a finished food product; the Department of Agriculture says that only 20 percent of food costs are achieved by the farmer, while the other 80 percent go to manufacturing, labor, packaging, transportation and marketing.
A couple of examples illustrate the impact of increased commodity wheat prices on the prices of common wheat-based products:
Wheat consumption in the U.S. is around 200 lb./person/year, which is three and a third bushels. Even at $12, then, commodity wheat consumption costs each American, on average, less than $40 per year or about 10.8 cents a day. At $8 per bushel, which is the approximate range during the time this testimony was being written, commodity wheat consumption would cost each American an average of $26 per year or 7.2 cents per day.
On average, a baker can make about 70 one-pound loaves of white bread out of a bushel of wheat. At $4 per bushel, that makes the commodity wheat portion of a loaf worth about six cents; at $8 per bushel, about 11 cents; and at $12 per bushel, about 17 cents.
In the case of pasta, the numbers are roughly the same. The actual cost of durum in a one-pound package of pasta, even at today’s higher prices, is still only 20 to 30 cents of the $1.50 per package cost paid by the consumer. About a year ago, this was roughly 12 to 15 cents.
Raising the price of a cookie by 1 cent would cover a $9 per bushel increase in the price of wheat.
Though the numbers in these examples can vary slightly, they all point to the same reality – increased commodity prices, and specifically increased wheat prices, are not solely responsible for the prices increases we have seen in grocery stores.
What Impact Does This Have on Farmers?
While increased wheat prices are certainly a positive development for wheat farmers in general, the reality on the ground is not rosy for everyone. The vast majority of wheat producers didn’t achieve sales at record highs because they had existing contracts that required delivery or had already sold to service debts. Though it’s not being reported in the media, wheat futures are down a third from winter highs, with hard red spring wheat, a premium product of the Northern Plains, down by more than half. The decline in prices was not an unexpected market function; short supplies and continued demand typically does and has spurred increased plantings, bringing lower prices on the expectation of bigger crops.
At the same time, the cost of producing wheat continues to rise, with input prices in some cases double what they were just last year (see chart). USDA’s Economic Research Service estimates that the total cost of producing an acre of wheat will be around $230-$250 in 2008 and 2009 ($5.75 to $6.25 per bushel at a 40 bushel yield), versus $175.63 in 2002 ($4.39 per bushel at a 40 bushel yield)...."
"Conclusion
Wheat growers understand the concerns of millers and bakers facing increased wheat costs and of consumers in the grocery stores facing increased food costs. However, the agricultural market is historically very cyclical and, with increased input costs that are outpacing increases in futures prices, wheat growers also have concerns related to commodity prices. Wheat growers believe that allowing farmers to respond to signals from the marketplace is the correct approach to dealing with rising commodity prices, a position that is supported by the decrease in wheat futures prices by one-third or more in recent months."
http://www.uswheat.org/justReleased/doc/3CEA3B977C786FB985257450005977C9?OpenDocument#
I see US wheat growers made an interesting presentation to Washington... that well represents what is happening to us in Canada as well!
We need to get this information to the Canadian consumer... we are being cornered into an unsustainable situation economically!
"Wheat Industry Testimony to [the US] House Small Business Committee on Food Price Impacts
Statement for the Record from
David Cleavinger, President, National Association of Wheat Growers
and
Ron Suppes, Chairman, U.S. Wheat Associates
to the
House Small Business Committee
Hearing to Examine “Food Prices and Small Businesses”
May 16, 2008
Madam Chairwoman and Members of the Committee, we appreciate the opportunity to submit these comments on the causes and effects of rising commodity and food prices. We are sensitive to the concerns from bakers and consumers that rising commodity prices have affected the prices they pay for raw goods and food in the grocery store, but we also think it’s important to consider the issue from the perspective of the farmer who produces the commodity. This is especially salient for your Committee, since the vast majority of commodity producers are themselves part of small businesses.
What Has Caused Wheat Price Increases?
The historically high wheat prices we have seen recently are the result of a combination of factors including:
Strong competition for acres among crops in an environment where wheat is losing competitiveness.
Production problems including poor weather conditions in many wheat growing regions worldwide including the U.S., Australia and parts of Europe.
Global consumption exceeding production seven of the last eight years.
Increased world demand for food, especially high quality food including wheat products, from both larger world populations and a rising middle class in developing countries.
Domestic stocks at 60-year lows and world stocks at 30-year lows.
A weak dollar promoting increased exports from the U.S., which is the world’s largest wheat exporter and sells about half of its wheat crop overseas in a typical year.
Export restrictions by some countries, which have curtailed the world’s access to wheat.
Wheat competitiveness, highlighted in the first bullet point above, has been a particular concern for the wheat industry for a number of years. The decline in wheat acres in the United States is not a recent phenomenon spurred on by biofuels, as many would suggest. On the contrary, wheat acres have been declining steadily for decades; plantings are about 30 percent lower than in the 1980s.
Perhaps the largest single reason for this change is that the availability of technology, including biotechnology, in competing crops like corn and oilseeds has raised the opportunity cost of growing wheat. From the perspective of a grower, this means that the wheat market has to pay more to encourage plantings. The wheat industry agrees with some in the milling and baking industries who have said that the entire wheat chain is paying a huge cost for our failure to adopt new technology, like biotech traits.
Starting in 2006, NAWG and the North American Millers’ Association have led a series of “Wheat Summit” discussions with stakeholders throughout the wheat chain, including producers, millers and bakers, to discuss and find solutions to the competitiveness problem facing domestic wheat production. NAWG and U.S. Wheat Associates are actively working to create a market environment in which biotech traits in wheat are beneficial to producers, users and consumers.
What Impact Does This Have on Consumers and Food-Reliant Small Businesses?
Wheat, like any commodity, makes up a very small portion of a finished food product; the Department of Agriculture says that only 20 percent of food costs are achieved by the farmer, while the other 80 percent go to manufacturing, labor, packaging, transportation and marketing.
A couple of examples illustrate the impact of increased commodity wheat prices on the prices of common wheat-based products:
Wheat consumption in the U.S. is around 200 lb./person/year, which is three and a third bushels. Even at $12, then, commodity wheat consumption costs each American, on average, less than $40 per year or about 10.8 cents a day. At $8 per bushel, which is the approximate range during the time this testimony was being written, commodity wheat consumption would cost each American an average of $26 per year or 7.2 cents per day.
On average, a baker can make about 70 one-pound loaves of white bread out of a bushel of wheat. At $4 per bushel, that makes the commodity wheat portion of a loaf worth about six cents; at $8 per bushel, about 11 cents; and at $12 per bushel, about 17 cents.
In the case of pasta, the numbers are roughly the same. The actual cost of durum in a one-pound package of pasta, even at today’s higher prices, is still only 20 to 30 cents of the $1.50 per package cost paid by the consumer. About a year ago, this was roughly 12 to 15 cents.
Raising the price of a cookie by 1 cent would cover a $9 per bushel increase in the price of wheat.
Though the numbers in these examples can vary slightly, they all point to the same reality – increased commodity prices, and specifically increased wheat prices, are not solely responsible for the prices increases we have seen in grocery stores.
What Impact Does This Have on Farmers?
While increased wheat prices are certainly a positive development for wheat farmers in general, the reality on the ground is not rosy for everyone. The vast majority of wheat producers didn’t achieve sales at record highs because they had existing contracts that required delivery or had already sold to service debts. Though it’s not being reported in the media, wheat futures are down a third from winter highs, with hard red spring wheat, a premium product of the Northern Plains, down by more than half. The decline in prices was not an unexpected market function; short supplies and continued demand typically does and has spurred increased plantings, bringing lower prices on the expectation of bigger crops.
At the same time, the cost of producing wheat continues to rise, with input prices in some cases double what they were just last year (see chart). USDA’s Economic Research Service estimates that the total cost of producing an acre of wheat will be around $230-$250 in 2008 and 2009 ($5.75 to $6.25 per bushel at a 40 bushel yield), versus $175.63 in 2002 ($4.39 per bushel at a 40 bushel yield)...."
"Conclusion
Wheat growers understand the concerns of millers and bakers facing increased wheat costs and of consumers in the grocery stores facing increased food costs. However, the agricultural market is historically very cyclical and, with increased input costs that are outpacing increases in futures prices, wheat growers also have concerns related to commodity prices. Wheat growers believe that allowing farmers to respond to signals from the marketplace is the correct approach to dealing with rising commodity prices, a position that is supported by the decrease in wheat futures prices by one-third or more in recent months."
http://www.uswheat.org/justReleased/doc/3CEA3B977C786FB985257450005977C9?OpenDocument#
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