No short-term solutions for price struggles, says bakers group

By Neil Merrett

- Last updated on GMT

Related tags Wheat prices World population

Global concerns amongst bakers over high prices of their goods will not be alleviated overnight, even with the introduction of new support measures for the industry, says the director of trade body, the Bakers Federation.

Gordon Polson told that the current high prices paid for staple goods like bread were a result of a number of factors such as an increasing global population and high demand, making them unavoidable.

Just last week, US-based counterpart, the American Bakers Association (ABA) ,called for government support to help stave off the current high prices for its products, suggesting consumers were at breaking point in terms of affordability.

Land release

The organisation called for a number of measures including allowing farming on some land currently kept free under the Conservation Reserve Program (CRP), which it claims is not 'environmentally sensitive', to help alleviate current supply pressures.

The CRP is designed to protect land in 'environmentally sensitive' areas like lakes rivers streams or farming swamp lands. In its recent calls to government though, the ABA that one third of land protected in the program, representing 10 million acres could be freed up.

"[The] ABA is not asking for the wholesale dissolution of the CRP," ​said Sanders. "[It] is asking for a commonsense approach to implementing the program."

According to the ABA, these solutions, which also call for the reassessing of current crop levels being used in production of bioethanol and other alternative fuels, can help turnaround an eight per cent rise in overall food prices during 2008.

The group said that it has particular concerns about the true impact of bioethanol production on the bakery industry.

"While USDA argues that only 2 to 3 percent of the increase in food prices is due to the ethanol program, many other economic, business and social organizations have strong evidence indicating that as much as 75 percent of the rise in food prices can be attributed to ethanol,"​ said Sanders, citing World Bank figures. "Easing this mandate would provide balance between food and fuel policies which is critical."

European action

Polson said that while there were similar concerns in Europe over fears in terms of grain prices and baked goods, in the short-term at least, similar measures enacted in the bloc had not drastically changed the situation.

He pointed to the removal of the European Commission's set aside policy, which paid farmers not to grow land to protect wheat prices, as an example of steps that have been taken in relation to the high costs.

"Land set aside not to be developed agriculturally can now be used to grow crops following the rule change,"​ he stated. "While this has made some difference, it has not been substantial as the industry requires."

Bioethanol impact

Polson also claimed that the issue of crops being swallowed up for use in biofuel production was more prevalent in the US, though some nations like the UK were looking at reviewing current biofuel policy.

Global development

Despite ABA calling for reassessment of these two issues in light of higher prices and costs facing the consumer, Polson added that the current market prices reflected general global development.

"The world population is continuing to grow with greater demand for cereal products occurring,"​ he said. "This will not change over night and most statistics suggest that the high price trend may be with us for some time."

The ABA nonetheless believe that drastic action by its own government is required to turnaround major cost hikes that have continued to blight the industry.

US grain price

"In February 2008, wheat prices set new record, reaching over $24 a bushel on the Minneapolis Grain Exchange and over $13 a bushel at the Chicago Board of Trade,"​ said Lee Sanders, senior vice president of the ABA. "To put this in perspective, in February 2007, wheat prices - per bushel - were around $9 a bushel in Minneapolis and $4 to $5 a bushel in Chicago."

Around the same time, Sanders added that wheat prices increased 173 percent in a year.

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