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Editor's Note

May 1, 2008
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Some of Dan Malovany’s favorite words begin with the letter F, so it just warms his heart to hear them being used when it comes to describing the current commodity situation.




Bombs Away

Not to be politically incorrect, but some of my favorite words begin with the letter F so it warms my heart to hear them being used repeatedly when the topic of “flour” prices comes up.


That’s not to say our “friends” in the snack and baking industry are a bunch of potty mouths, but sometimes there is simply no better way to describe the current commodity situation without a few choice F-words.


For example, take “farmers” and, specifically, the National Association of Wheat Growers, which is urging the Agriculture Secretary Ed Schafer to hold the line and refuse to release some six million idle acres of non-environmentally sensitive farmland out of the Conservation Reserve Program, according to the Congressional Daily. Apparently, wheat yields are lower than other crops because bioengineered wheat is not being used. They want the bakers to support the commercialization of biotech wheat.

Officially, groups like the American Bakers Association haven’t taken a position on bioengineered wheat.

However, if I were a betting man, I would guess that bakers would rather be in Eliot Spitzer’s shoes than be caught using genetically-modified flour in their products.


Maybe, for the sake of argument, the industry should reconsider. Can you imagine what would happen to wheat exports if word got out that the United States is trying to sell biotech wheat? In Europe and elsewhere, many countries currently have their undies in a bundle over the possibility of adding folic acid to baked goods, even though it’s been used in the United States for 10 years and has prevented millions of neural-tube birth defects. Most consumers over there wouldn’t feed a product made with Frankenstein flour to lab rats if they had their druthers. Fortunately, cooler heads have prevailed in the industry, which recognizes that all-natural and not all-altered is the hot button today.


But, then again, going biotech would be one way of slowing exports.


Sure, not all farmers are bad, but they shouldn’t expect a group hug from the snack or baking industry anytime soon. It may not be fair, but bakers can’t help but feel they’re getting “filthy” rich every time they fill their silos with flour. While the shortage in supply for certain commodities isn’t going away anytime soon, neither is the unprecedented demand especially among the 3-Fs – “food,” “feed” and “fuel.”


For yet-to-be-determined reasons, some village idiots at the USDA are under the delusion that the current spike in wheat and corn prices is only a temporary blip. Blip? Blip this. That blip ain’t going nowhere soon until the government’s and many Americans’ love affair with making fuel from food dies down. You’d think the thought of a $5 loaf of bread and an even more expensive gallon of milk and a pound of ground meat might cool the passion. Unfortunately, the fear of paying $4 for a gallon of gas will likely hurt consumers’ pockets even more.


There are other F-words such as “funds” that are affecting the current disheartening situation. I know there are a lot of conspiracy theories on the murky world of billion-dollar hedge funds manipulating the markets, and who knows what’s true. However, there are alternatives such as Deutsche Bank Agriculture Fund, which easily trades as DBA on the Amex. The fund is composed of “futures” contracts such as wheat, corn, soybean and sugar that are some of the most liquid and widely traded commodities.


Then there’s the “falling” dollar. What is increasingly expensive for U.S. bakers and snack producers has become cheaper for international companies. That’s fine if you’re exporting cars or selling services abroad. It’s downright lousy if you’re trying to put an affordable loaf of bread or value-added package of snacks on your neighbors’ table.


In fact, it’s getting freakin’ ridiculous.

 

Dan Malovany, editor

malovanyd@bnpmedia.com

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