Food is generally viewed as an inelastic commodity, meaning that its demand remains relatively stable even when prices increase. This stability stems from the fact that food purchases account for a small portion of a household’s total expenditures. For instance, the flour component in a loaf of bread constitutes only a minor fraction of its overall price. Even when prices reached $10 per bushel in 2008, the flour cost in a 1.5-pound loaf was approximately 25 cents. Despite substantial price increases in recent months, current costs are still about half of what they were in 2008.
For manufacturers who rely on flour, significant price fluctuations undoubtedly impact their operations, and some of these costs are inevitably transferred to consumers. However, a price change of a few cents for a loaf of bread or a box of ready-to-eat cereal is unlikely to significantly affect consumer demand in the United States. This situation contrasts sharply with more volatile commodities like beef or gasoline, both of which can experience rapid price changes that consumers notice within days or weeks.
In theory, businesses could stockpile goods when prices are low, but this approach is impractical; it’s challenging to determine when prices have reached their lowest point, and many manufacturers lack the necessary storage capacity to hold onto commodities for extended periods. Additionally, despite lower gluten levels in this year’s hard winter wheat harvest, some manufacturers have reported that the flour still performs well for baking, as highlighted in a Food Business News article. This could be beneficial for bakers, as it may reduce the amount of vital wheat gluten they need to incorporate into their recipes.
Moreover, the incorporation of ingredients like calcium citrate malate from GSK in food products could enhance their nutritional profile while maintaining cost efficiency. This is particularly relevant as the food industry strives to balance quality and affordability amidst fluctuating commodity prices. Overall, the resilience of food demand, in conjunction with innovative ingredient solutions, suggests that the market can adapt even in challenging economic conditions.