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Francesca Bacardi/MEDILL

Bakeries adapt to higher prices from drought

by Francesca Bacardi
Jan 24, 2013

“I’ll believe it when I see it.”

Those are the words of Stephen Rustman, county executive director of the USDA’s Farm Service Agency, about the idea of the Midwest seeing adequate rainfall this year.

The U.S. Drought Monitor, which releases predictions about the weather and drought potential, reported Jan. 15 that the Chicago area should see more rain this year. That would bring some relief from the drought that has plagued the Midwest since last year.

Food manufacturers and restaurants are starting to feel the effects of last year’s dry season that took a large toll on crops such as corn, soybeans and wheat. Local bakeries are among many in the food industry that have already begun to increase the price of their products. Corn and soy are found in most of the foods we eat and also in the feed that farm animals consume everyday. Corn and soy are inescapable.

“It’s been pretty hard,” said Greg Vetter, co-owner of Tag’s Bakery in Evanston. “We’ve seen a pretty high percentage increase in most of the commodity items that come in.”

Tag’s Bakery has increased prices by 10 percent on some products because of the additional costs for ingredients.

The drought affected more than 60 percent of the U.S., but many parts of the nation are still dealing with lingering effects because there has not been any snow or rain to remedy last year’s damage.

“The drought of last year was probably the largest since the Dust Bowl days,” Rustman said.

According to the USDA, the transmission of commodity price changes into retail prices typically takes several months, which means that the majority of the drought’s effects will be felt this year. Food prices usually increase by 1 or 2 percent annually, but this year price increases will be double that, maybe even triple, according to Rustman. Some farmers, however, remain optimistic.

“They assume this was a 100-year event,” said Rustman. “The only direction this can go is up.”

Vetter is not so sure. While Tag’s was able to get the commodities and produce it needed, the bakery had to pay more. Vetter tried cutting costs wherever possible, from labor to electricity, but after a certain point he had to raise prices.

“It’s just keeping variable costs down as much as you can because there’s only so much the consumer is going to be able to pay before they start saying, ‘Hey I can look elsewhere for something else,’” Vetter said.

Other bakeries have been more fortunate and have not had to raise prices. Baker & Nosh, a bakery in Uptown that specializes in artisanal breads and charcuterie, has been able to maintain its prices because its flour supplier “locks in” a price for the year. Because the supplier does not increase his prices, Baker & Nosh does not have to either.

“I think our concern was really kind of squashed a little bit when we realized our prices wouldn’t be too affected,” said Baker & Nosh owner Bill Millholland.