Wheat as a Component of Bread
- Tuesday October 2, 2007
This analysis featured in the Ocotber 2, 2007 issue of the HGCA's MI Prospects, Volume 10, Issue 8
In the past, and particularly in the distant past, the impact of the cost of wheat on a loaf of bread was a hot political issue. However, since wheat now accounts for a very small component of the cost of bakery products and bakery products are a small proportion of consumer expenditures, it is difficult to see how it can survive as a concern.
In 1846 the repeal of the Corn Laws, which had imposed import tariffs on wheat inflating the cost of bread, was enough of an issue to result in the resignation of a prime minister, twice, and the fall of a government. However, as import tariffs are an integral, long standing and widely accepted part of the EU’s Common Agricultural Policy, one might suppose that the issue was long forgotten.
Milling and baking interests, however, appear careful to publicize increases in costs arising from higher wheat prices and the issue continues to be one that attracts press and media attention. This is probably because wheat flour, and therefore wheat, is known to all to be the major physical component of a loaf of bread. The fact that it (and thus the farmer’s slice) is now a minor cost component is probably not widely appreciated.
It is relatively simple to calculate roughly the farmer’s share of the loaf of bread in terms of farm gate returns for milling quality wheat. The miller’s flour yield from wheat is typically about 75%, but will vary with the class and quality of wheat and, of course, end use as notably in the case for whole wheat flour.
Flour constitutes about 57% of the weight of a loaf of bread. Thus an 800gr loaf contains 800 x 57 /100 = 456gr of flour. In turn those 456gr of flour with a 75% milling yield will require the milling of 456 / 75 / 100 = 608gr of wheat. Or, from the flour from a tonne of wheat 1000 / 0.608 = 1,645 loaves of bread can be baked.
Further simple math tells us that if a farmer gets paid £100 /t, the resulting cost component in the loaf of bread is £100 /1,645 = £0.06. Not surprisingly with wheat representing such a minor cost, the relationship between wheat and bread prices is now almost non existent. The energy and labour cost components of a loaf of bread surely far exceed those of wheat and increases in these and no doubt other costs have outweighed the savings from declining wheat prices in past years.
And, in any event, under normal circumstances the pricing of bread appears to have more to do with marketing than costing. Currently the supermarket price of a 800gr white loaf varies from 54 pence, and even 32 pence, for a store brand product, to £1.12 for a premium national brand, and almost up to £2.00 for multi-grain, stone ground, special diet, etc. bread. Beyond the loaf of bread the list of bakery products seems almost endless. It is also worthy of note that National Statistics surveys indicate that the price of standard 800gr white loaf fell from 91 pence in April to 88 pence in July, while the price of milling wheat rose from £99.30 to £130.60 /t.
However, milling wheat prices have moved on from there and in early September were approaching £200.00 /t, ex-farm, adding about 6 pence per loaf to industry costs compared to a year ago. How the milling and baking industry will, as opposed to how it would like to, handle this extra cost will almost certainly be determined by competition.
News reports on the issue, like this article, are likely aimed at stakeholders rather than politicians. With expenditure on bakery products a small portion of family expenditures, bread prices are surely of very diminished political significance. Defra surveys indicate per capita expenditure on bread was just 97 pence per week in 2005/06. National Statistic’s weighting for bakery products component of the Consumer Price Index, which is a measure of relative expenditure, suggests consumers spend 0.4% on their income on bread and 0.6% on biscuits and cake, compared to 1.0% on soft drinks.
David Walker 001 780 434 7615
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