At the bakery of Jose, a 54-year-old man who has been running his shop for more than two decades, a piece of sweet bread costs five pesos, but just four months ago it was three-fifty. “We raised him, but that doesn’t make up for it. The four essentials are through the roof: flour, sugar, butter and egg,” he explains.
In Leobardo Coca, a popular neighborhood of the city of Puebla, a few meters from the National Avenue, there is José’s bakery. It is small, so small that there is no separation between the panettone shelves and where the oven is, it all occupies the same small room. The increase in commodity prices is almost unprecedented. Ricardo, who has three bakeries in the state of Mexico, agrees: “In the eleven years I’ve been in this business, I’ve never experienced anything like this.”
Wheat at an all-time high
In March and May of this year, wheat reached its all-time high on the exchange, exceeding 13 dollars per bushel (a measure equivalent to about 25 kilograms); that price is almost double that in March 2021, when it was around six. The increase in the price of wheat affects the price of the flour needed to make bread.
Regarding these changes, Jose, the baker from Puebla, tells me that at the beginning of the pandemic, a 44-kilogram bag of flour cost 360 pesos, but today it is 840. Ricardo, the Mexican, shows me his invoices: the same package he bought in January 2022 year for 550 pesos, in July he bought it for 830, that is, 50% more expensive.
Although Mexico grows wheat, its production is not enough to meet national demand. José Luis Fuente, executive president of the National Chamber of the Wheat Milling Industry (Canimolt), also commented that most of what is produced in the country is not used to make bread, instead it is used to make soup paste . According to data from the Ministry of Economy, 69% of the bread wheat offered between April 2021 and April 2022 was imported.
The president of Canimolt commented that there are many countries in the world that are looking for wheat, but very few are producing it, and that the increase in its price is related to two factors: the weather and the war in Ukraine. “The most important factor is time. The major exporters of wheat are over the Tropic of Cancer and most crops depend on rainwater. Wheat needs heat during the day and cold at night. From October last year, prices started to increase because there was drought and excessive rain, hence production was lower than expected.”
According to a report by the Food and Agriculture Organization of the United Nations published in 2015, climate change has negatively affected cereal crops: “Increasing frequency of abnormally high temperatures in most regions is damaging crops” (p. 30). This year, droughts and floods threatened grain crops in Canada, the United States and the European Union. A report by the United States Department of Agriculture, from which Mexico imports the most wheat, shows that in 2021 there was a drought in 53% of the territory where wheat was sown in winter.
The second factor that explains the increase in the price of wheat – and therefore bread – is the war in Ukraine, which began in March of this year. According to the president of Canimolt, the price of wheat began to stabilize in February, but then Putin began his invasion. Russia and Ukraine are the main exporters of this cereal; together they export about 30% of the world’s wheat. Since arriving in Ukraine, Russia has seized tons of wheat stockpiles and blocked its export across the Black Sea, leaving countries in Africa and the Middle East without the grain.
Fuente explains that although Mexico imports a relatively low percentage from these countries, the disruption and uncertainty in exports has created speculation, which has increased their price. Ricardo, owner of La Certeza bakery in the state of Mexico, experienced it personally: “There was a time when they said there would be no more flour, and I said ‘let them fill my warehouse, because without flour there is simply no bread.’ “.
Added to the war-induced speculation were the recent heat waves in India, which, although the world’s second largest producer of wheat, is a modest exporter; almost everything is used for domestic consumption. Production in India was increasing and could help stabilize the price. However, 2022 saw the hottest March in the country’s history; in that month, temperatures reached 50 degrees Celsius, which damaged 10% of the produce. India then imposed an export ban to supply its domestic demand, which almost immediately led to a 6% increase in the price of wheat.
Despite the importance of weather conditions in cereal production, this explanation is relatively absent from discussions of rising wheat and bread prices. “Climate change is very important to explain,” says Paloma Villagomez, a food researcher, “but it’s always easier for world leaders to point to another world leader and a common enemy [Putin] than to a problem in which everyone has more responsibilities and interests”.
In addition, Ukraine and Russia together export about 70% of the world’s sunflower oil. This has affected not only the price of this product, but also its substitutes, such as soybean and palm oil, all of which are needed to make margarine and shortening used by bakeries. Ricardo’s invoices in the state of Mexico show that the 24-kilogram case of lard has increased by 15% over the year.
The struggle of bakeries for survival
To counter the increase and survive, bakeries are resorting to different strategies. “What many have done is cut back on quality and weight. If before we threw the shell at two keels, now we throw it at seven hundred [se refiere a la masa para sacar las conchas] and we give more volume to the piece to make the flour spread,” Alberto, who has had a bakery in Matamoros, Tamaulipas, for fourteen years, tells me.
“Then what I did was to increase the price, from six pesos I gave her, I raised it to seven, but since the sudden increases came, I don’t see that coming anymore,” Alberto adds, and that’s how sales dropped .. He affirms that whereas in December he made nine thousand loaves of bread a week, he now makes three or four thousand. José, the owner of the small bakery in Puebla, agrees, although he no longer receives as much money from his business, he cannot raise the price any more: “No, a lot of competition. There are two other bakeries in the same block,” he explains. Regarding how the increase in the price of bread affects them, Paloma Villagomez says: “Food is par excellence an element of the budget adjustment for families. People tell you “eat whatever, what I can’t do is stop paying electricity, gas, whatever the kids need for school, etc”.
According to Fuente, it is also very difficult for bakeries to raise the price because most of it is determined by the convenience stores. “If you look, in each of these stores the bread is at the bottom, because for them the business is not the bread, but what you find on the road. Villagómez adds: “It’s much easier for big stores to spread their losses across more products. Say “Upload this and recover there”. Something that small bakeries that are super specialized cannot do”. Karina, who runs the family bakery, also in Puebla’s Leobardo Coca neighborhood, says: “Many of them already work with ready-made flours. Pretend to be flour pancakes, comes for a cake, just stirs, but then the quality changes. Chedraui bread, from Bodega, is like that, so it doesn’t taste the same, they no longer invest in products like that. That’s why they call it artisanal here.”
Ricardo, who has three bakeries in the state of Mexico, commented that the smaller ones have the most problems because they have to buy from distributors where everything is more expensive. “The price of the package weighs on me and I buy it directly from the mill, but the minimum you should ask for is fifty packages [de 44 kilos]. The mill tells you “buy me fifty and I’ll take them home.” Furthermore [las panaderías más pequeñas] they have to go for the flour and load the packages on top”. Jose says he wishes they would cut out so many middlemen: “We’ll buy groceries there. The oil costs me four hundred pesos, but if you buy ten they give you another one, it’s cheaper and they still make a profit. It should leave the factory in two hundred or two hundred and fifty.
“I talked to other colleagues here in Matamoros and they told me that many smaller bakeries have already closed. For example, in the places where they sell margarine, many small bakeries buy there and they say they stopped buying, automatically closed. If you have a bakery supply location, you will see that people have stopped buying. This guy didn’t come anymore, that one didn’t come anymore, because they are already closed”, concludes Alberto.