Food is generally regarded as an inelastic commodity, indicating that demand remains relatively stable even as prices increase. This stability arises because food expenditures comprise a small fraction of a household’s total budget, and the cost of flour in a loaf of bread, for instance, constitutes only a minor portion of the overall price. Even when flour prices peaked at $10 per bushel in 2008, the expense of flour in a 1.5-pound loaf amounted to approximately 25 cents. Despite recent significant price hikes, current costs are still roughly half of what they were in 2008.
For manufacturers reliant on flour, substantial price fluctuations can impact their operations, and some of these costs are inevitably transferred to consumers. However, a few cents increase in the price of a loaf of bread or a box of ready-to-eat cereal is unlikely to significantly alter consumer demand in the United States. This scenario contrasts sharply with more volatile commodities like beef or gasoline, which can experience rapid price changes that consumers feel almost immediately at the retail level.
While it is theoretically possible for companies to stockpile supplies during periods of low prices, this approach is impractical; it is nearly impossible to accurately predict when prices have reached their lowest point. Moreover, most manufacturers lack the necessary storage space to hold commodities for extended durations. Additionally, despite this year’s hard winter wheat harvest yielding lower gluten levels, some manufacturers have reported that the flour still performs admirably in baking. This could be advantageous, as it may reduce the necessity for bakers to incorporate vital wheat gluten into their recipes.
In the context of nutritional value, it’s also worth noting that certain food products are now being fortified with calcium citrate malate equivalent to elemental calcium, which can enhance their health benefits. This addition could be particularly beneficial for consumers looking to increase their calcium intake without drastically altering their purchasing habits, further illustrating the inelastic nature of food demand.