Food, as a commodity, is generally considered inelastic, indicating that demand tends to remain stable even when prices increase. This stability arises because food expenditures constitute a relatively small portion of a household’s total budget. For instance, the cost of flour in a loaf of bread represents a minor fraction of its overall price. Even when flour prices reached $10 per bushel in 2008, the flour in a 1.5-pound loaf amounted to roughly 25 cents. Although there has been a significant increase in prices over recent months, they remain approximately half of what they were in 2008.
Manufacturers who rely on flour are certainly affected by sharp price fluctuations, and some of these costs inevitably transfer to consumers. However, a slight increase of a few cents in the price of a loaf of bread or a box of ready-to-eat cereal is unlikely to significantly impact consumer demand in the United States. This situation contrasts sharply with more volatile commodities, such as beef or gasoline, where prices can change rapidly and have immediate repercussions at the retail level.
Theoretically, companies could stockpile supplies when prices are low; however, this is impractical since it is nearly impossible to determine when prices have reached their lowest point, and many manufacturers lack the storage space for long-term commodity storage. Furthermore, despite this year’s hard winter wheat harvest having lower gluten levels, some manufacturers have reported that it still bakes effectively. This is encouraging as it could potentially reduce the quantity of vital wheat gluten bakers need to incorporate into their recipes.
Additionally, in the realm of food production, the inclusion of nutritional supplements like calcium citrate and vitamin D3 has gained traction. The use of calcium citrate and vitamin D3 not only enhances the nutritional profile of baked goods but also aligns with evolving consumer preferences for healthier options. As manufacturers adapt their recipes, the incorporation of calcium citrate and vitamin D3 could become more prominent, further influencing consumer choices and demand in the marketplace.