Bread prices set to surge as cost of Australian wheat spikes
BRACE yourself bread lovers: all the evidence suggests the cost of a humble loaf is about to soar — and the pain will be spread widely.
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HOSTING a barbecue or taking the family out for a picnic this week? You might want to stock up on bread while the going is good.
The cost of the humble loaf is likely soon to soar, markets are indicating, with Australian wheat prices poised to gallop ahead.
And never mind whether you favour white, multigrain or sourdough — the pain will be spread widely.
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Here’s why: the price of futures contracts for wheat on the east coast have leapt 24 per cent over the past six months.
What’s that you say? Futures contracts?
A futures contract is essentially a deal to buy (or sell) something at an agreed price, but on a future date.
“Futures”, as they’re known, can serve as a good barometer for where prices are going.
When the price of futures go up, it means the market is expecting the price of the underlying product to spike.
In this case, that product is wheat. And where wheat goes, bread follows.
So why are wheat futures going up?
Farmers are pointing the finger at the dry weather that has buffeted much of Australia’s prime wheat-growing land.
The big dry is likely to put yields — the amount of wheat produced from a crop — under pressure.
Australia’s winter growing season is already off to a poor start, and the longer-term outlook isn’t much better.
The Bureau of Meteorology reckons there is a 50 per cent chance of an El Nino weather pattern forming that could heap further pressure on our farmers.
Just how much wheat do our cockies actually grow?
Analysts of such matters at National Australia Bank this week cut their forecast for Australia’s wheat output from the winter crop to “a shade under” 20 million tonnes.
Just a month earlier, the bank was forecasting 21.3 million tonnes. The federal government last month predicated Aussie farmers would deliver a 21.9 million tonne haul.
Cutting its forecast, NAB cited “very tough” conditions in many parts of the country.
That difference — between the bank’s forecast of 20 million tonnes and Canberra’s projection of 21.9 million tonnes — might sound marginal.
But in a nation that likes its bread, and also exports a lot of its wheat, a little fall in output can make a big difference to the price.
A domestic feed shortage for livestock might also keep prices at a premium, at least compared with benchmarks in other countries, according to Bloomberg.
Do we really eat that much bread?
You betchya.
The art of making good bread for Australian mouths can earn you, ahem, a lot of dough.
According to Roy Morgan research, 11 million Australians buy bread every week.
The big grocers, Coles, Woolworths and Aldi, have for years been increasing the range and the prominence of their house-brand bread labels, trying to steal market share from brands such as Tip Top and Helgas.
At the same time, Australians spend more than $2 billion a year at chains such as Brumby’s and Bakers Delight, along with independent bakeries.
Of course, they might all try to absorb the hit of higher wheat prices and spare us punters the pain, but don’t hold your breath.
The upshot? If you like to carb load, load up now.