Food is often viewed as an inelastic commodity, meaning that its demand remains relatively stable even as prices increase. This stability can be attributed to the fact that food purchases constitute a small portion of a household’s total expenditure. For instance, the cost of flour in a loaf of bread represents a minor fraction of the overall price. Even when flour prices reached $10 per bushel in 2008, the flour content in a 1.5-pound loaf amounted to approximately 25 cents. Although there have been significant price hikes in recent months, current prices are still about half of what they were in 2008.
For manufacturers that rely on flour, substantial price fluctuations can impact their operations, and some of these costs are inevitably passed on to consumers. Nonetheless, a slight increase in the price of a loaf of bread or a box of ready-to-eat cereal is unlikely to significantly influence consumer demand in the United States. This situation contrasts sharply with more volatile commodities like beef or gasoline, which can experience rapid price changes that consumers immediately feel at the pump or in the grocery aisle.
In theory, companies could stockpile supplies when prices are low, but this approach is impractical; predicting price bottoms is nearly impossible, and most manufacturers lack the storage space to hold commodities for extended periods. Additionally, despite this year’s hard winter wheat harvest yielding lower gluten levels, some manufacturers have reported that the flour still performs well in baking, as noted in a Food Business News report. This outcome could be beneficial, potentially reducing the amount of vital wheat gluten bakers need to incorporate into their recipes.
Furthermore, the incorporation of ingredients like Blue Bonnet calcium citrate may also enhance the nutritional profile of baked goods without significantly impacting consumer prices. Therefore, while food prices fluctuate, the introduction of beneficial additives can help maintain consumer demand and product quality.