Lethbridge Herald, The (Newspaper) - September 10, 1973, Lethbridge, Alberta
FABULOUS LAS VEGAS 5 DAYS 4 NIGHTS ACCOMMODATION Circus Circus Many Extras Several from Calgary Only rtn. per person (double occupancy) ART WILLIAMS TRAVEL CENTRE VILLAGE MALL PHONE 328-3201 The Lethbridge Herald SECOND SECTION Monday, September 10, 1973 Pages 13-24 LETHBRIDGE OFFICE FURNITURE LTD. Lower Level 7th Street Shopping Mail Lethbrldge, Alberta Phone (403) 328-7411 HOME AND OFFICE SAFES RICKERVIN photo Bread formula Wheat milled into flour, plus salt, yeast, sugar, milk powder, shortening and water equal bread The ingredients are pictured above in their correct proportions. A 20-ounce loaf of bread is costing Southern Albertans about 31 cents these days. From the small pile of wheat above can be milled 15 ounces of flour. Then, to make a loaf, those 15 ounces of flour must be blended with .3 of an ounce of salt, .37 of an ounce of yeast, .45 of an ounce of sugar, .45 of an ounce of milk powder, .45 of an ounce of shortening and slight- ly less than three ounces of water. The recipe is that used by Ellison Milling Co. of Lethbridge. Other bakeries use roughly the same a- mount of ingredients. BREAD PRICING: Who prof its most when consumers pay record high prices for one of the most basic items on the Canadian menu? By RIC SWIHART Herald Staff Writer Record high prices for bread are edg- ing Canada's chief wheat product into the luxury category. Bread, practically synonomous with life itselt since Mother Isis first closed the door on her Egyptian oven about 1.100 B.C.. has through the centuries been the staple diet for millions. It has gained prominence in religious circles, become essential in all restaurants and is an integral part of family eaiing habits. But drastic price hikes during the past month threaten to change bread's claim to lame as a food for all people. .July 20 was the date that changed the destiny oi wheat producers in Canada. That was the day the price millers paid lor wheat was allowed to float at the world price less a subsidy from the Canadian government that gives the public a price break for wheat products bought in Canada. Iliifie ont> day jump What in effect happened was the fix- ed price ol per bushel millers had been paying for about four years became the world price of 62 less the subsidy. Millers in one day saw their wheat bill increase 67 cents a bushel. By Aug. 29 in the face of high world demands and short supplies, the world price for wheat had jumped to Millers had to pay per bushel. Under the old pricing system, Ellison Milling Co. in Lethbridge was charging bakeries per hundred pounds of white enriched flour. Aug. 29 bakeries were paying per hundred pounds for the same flour. A two-month forward contract scheme established by the Canadian wheat board proved a savior lor many baking institutions. Some bakeries had arranged for flour in early July under the scheme and this allowed them to purchase flour to fill their needs for the months ol July and August. inler old [H ice These supplies were bought under the old wheat price of per bushel. Because of the forward contract flour in the bread manufacturing pipeline through the months of July and August could have been priced under the old wheat pricing schedule of per bushel. During the period of July 19 to Aug. 29 when prices for wheat and flour increased, bread jumped to 31 cents for a 20-ounce loaf from 27 cents. During the year preceeding the price hike, bread had sold for a stable 26 cents a loaf at most bakeries. Local bakeries who didn't buy under I ho forward contract had to start pay- ing the higher prices for flour as soon as the milling companies adjusted the prices. According to these bakeries, the price increase to 31 cents a loaf was not only justified, it was essential. Itig Itukers shift loo In a move that attracted criticism from some small bakers, the larger bakeries using the forward contracts shifted their prices upward Sept. 4. although the flour they were using was purchased under the old price. Millers claim the increase in the price of flour has resulted directly from the increase in wheat prices. The prices of other ingredients of white enriched bread, yeast, sugar, milk powder and shortening increased while salt and water remained con- stant, but wheat was the most signifi- cant part in the increased bread and flour prices, they say. Immediately the finger was pointed at the farmer as the man fleecing gold from an unsuspecting public. Who ever heard of any person doubling his in- come in a span of 40 days, especially when the public was being drastically affected9 hat real meaning? This is what wheat means to the general public. But it isn't so. Canada produces about 500-600 million bushels of wheat annually. Human domestic consumption amounts to about 100 million bushels. The world market price for wheat now is per bushel. That means, in theory, that Canadian farmers could split the in- come from about 400 million bushels of wheat sold at per bushel. But only if all the wheat is sold now at per bushel. The Canadian wheat board is a government agency set up to sell Cana- dian grains. It controls the movement and sale of wheat, oats, barley, move- ment by rail of rye. flaxseed and rapeseed. The wheat board sells Canadian grain throughout the world. It has to compete with other grain growing giants and the supply and demand of grain in the world establishes the world price or the price the wheat board can get for Cana- dian grain. Ittishel secret The wheat board proudly announced multi-million-bushel wheat sales to China and Russia during the 1960s. Sales ol larger and smaller magnitude have been announced when they were made. But per bushel prices have never been announced The reason no prices are announced is that on very large sales, the selling price could be lower per bushel than sales of smaller amounts. To announce the lower selling price would set Canada's selling price for all nations. Farmers are usually paid in two payments and sometimes three in- stalments for any given crop year. They receive a per bushel initial payment, established by the wheat board, as soon as thev haul the new crop to the elevator, whether at harvest time or during the year. 11 world sales are exceptionally good, an interim payment could be received bv December of the harvest year. payment A final payment, based on the entire sales for the crop year, are usually in the farmer's hands by March of the year following harvest. If sales by the wheat board exceed the amount of money expended on initial payments. Last year, farmers received an initial payment of per bushel. On the basis ol a record amount of grain mov- ed into export and domestic sales, the final payment will reach an estimated 50 cents per bushel, expected next March This means farmers in the Lethbridge district will likely get per bushel for their 1972-73 grain, ex- perts predicted for The Herald. Freight and handling charges to either export terminus is about 20 cents per bushel, leaving farmers with a net income of per bushel for milling quality wheat. For the 1973-74 crop now being harvested, the initial payment was set at per bushel because of the an- ticipated higher world price and and continued good export movement. S'.'J.flJ per bushel Experts feel the final payment ex- pected in March 1975. could reach a bushel, leaving the farmers with about a net income of per bushel after handling charges in Lethbridge. The computations needed to show- how much money farmers get from the sale of a loaf of bread are very com- plicated, as figures released by Ellison Milling Co. show. In the milling process, it takes 2.3 bushels of wheat, or 138 pounds, to make 100 pounds of white enriched flour. With all other ingredients added, a baker can make 138 pounds of bread from the 138 pounds of wheat. In a standard 20-ounce loal ot wnite enriched bread, there are 15 ounces of Hour. Using 100 pounds of flour, a baker can make 110 20-ounce loaves. The miller pays per bushel at Lethbridge for the wheat. Therefore the wheat accounts for in the 100 pounds of milled flour. for 100 pounds The farmer will receive about per bushel tor the same wheat sold dur- ing the 1973-74 crop year which is now being harvested. Therefore, the farmer will get about for the wheat need- ed to make 100 pounds of flour. Since the farmer gets for the wheat needed to make 110 loaves of bread, his net income from one loaf is 6.38 cents. The money charged to the millers by the wheat board per bushel less the amount paid to farmers) adds another 3.5 cents to each loaf. Since flour was selling for per hundred pounds Aug 29 and it was costing for the wheat, the mills were operating at a gross margin of per hundred pounds which was needed to cover delivery charges, bags, overhead, labor and equipment costs and profit. Similar calculations belore the price of wheat started to increase from per bushel showed the gross margin lor the miller was per bushel showed the gross margin for the miller was per hundred pounds which seems to support millers' claims that they haven't contributed to the increased cost of bread. Hour per loaj The cost of flour Aug. 29 accounted in total for 9.9 cents for each loaf of white enriched bread. In the recipe lor bread, .37 of an ounce valued at one cent is yeast. One half of a ccnl of sugar weighing .45 of an ounce. 1.3 cents of milk powder weighing .45 of an ounce. .45 of a cent of shortening weighing .45 of an ounce and one lil'th of a cent of salt weighing .3 of an ounce make up the rest of the ingredients. Total ingredient cost is 3.45 cents per loaf. Total ingredient weight is 2.02 ounces. The rest of the 20-ounce loaf, about 2.98 ounces, is retained water. The total cost of the ingredients including flour is 13.35 cents for one 20- ounce while enriched loaf of bread. Fanner's share Under the old pricing system for wheat, farmers received three cents of the cost of a loaf of white enriched bread. In the short time wheat prices have jumped, farmers have gained 3.38 cents extra for each loaf of bread sold. They won't get this increase until the final payment is calculated This leaves .62 cents that has been added on to the price of a loaf of bread since July 19 that can't be traced back to wheat prices. And this figure applies only when the number of loaves of bread numbers 110. II more loaves are made from 100 pounds of bread, the farmer return per loaf is reduced. Alex Kogler. owner of North Side Bakery, reports he can make 122 loaves ol bread out of 100 pounds of flour. Lethbridge McGavin-Toast master plant manager Robert Tunbridge said his firm produces 128 to 130 20-ounce loaves from one bag of flour. Mr. Kogler said another major firm in the province can make up to 135 loaves ot bread from the same amount ol flour "It all depends on the formula used C.osIs him 2I.V cents Under the increased flour price. Mr, Kogler claims it costs him 19.95 cents a loal lor the ingredi'ents and the manufacture ol the finished loal on the shell. Labor costs for the baker to do the work adds another two cents a loaf lor a total of 21.9 cents. Because Mr. Kogler makes his own bread, he figures the wholesale price at 28 cents a loal. At this figure, his in- come is 7.1 cents a loaf as a baker. He sells his bread for 35 cents a loaf, making another seven cents as the retail agent for his own bread. He said he sells 300 "loaves of white enriched bread on a good day. This brings him an income of a day from bread. But he and his wife both work more than 100 hours each week, he says, and their combined pay from their business investment of is less than per week. This amounts to about per hour. I.nn- wages, long hours Low wages and long hours in his own business makes Mr. Kogler feel perhaps the big bakeries have an unfair advantage He claims the big bakeries have an unfair advantage. He claims the big bakeries can sub-" stitute krasen, which sells for about per hundred pounds, for milk powder, which costs him per hundred pounds David Devine; president ot McGavin- Toastmaster in Vancouver, told The Herald in a telephone interview Thurs- day that flour is the biggest single cost component in the manufacture of bread. He claims his company's flour costs have gone up 50 per cent since July. The new control measures announced by the federal government last Tuesday should mean no further price increases to the bakeries, he said. further increase Although McGavin-Toastmaster ex- pected October costs to be up. a price increase won't be necessary now. He did say the cost of diesel fuel for the company delivery trucks was raised two cents a gallon Thursday but that this increased cost would be absorbed. McGavin-Toastmaster is primarily a wholesaler of bread, he said, except in Lethbridge where, the company holds four retail bread home-delivery routes. In the majority of their outlets, the bread is sold to the grocer and the grocer determines the price margin he needs to make money on bread. McGavin-Toastmaster has a 27-cent-per-loaf primary wholesale price for bread. Mr. Tunbridge said that price may vary. Mr. Devine said the wholesale price varies because some, grocers buy in much larger quantiles'aiid' they deserve a lower price. McGavins declined a Herald request that the firm explain, as Mr. Kogler ilul. its costs and profit margins.