U.S. Consumers Feel the Pinch as Wheat Prices Soar

Anthony Ippolito visits the Breadsmith bakery on Chicago's Near-North Side once or twice a week for coffee and a pastry, a rare indulgence in his otherwise healthy diet.

"I don't buy these things that much, so it's sort of a treat when I do," said Ippolito, a biology professor at nearby DePaul University.

But like many consumers paying close attention to food prices that have been creeping higher, Ippolito said he might deny himself the pastries if he has to pay much more for them.

Wheat prices are at record highs, with futures at the Chicago Board of Trade surging amid tight global supplies and strong demand from importing nations.

U.S. food companies, already struggling with higher energy, transportation, packaging and labor costs, have adjusted some of their prices or reduced package sizes to cope with the rising input costs, industry analysts said.

Sara Lee Corp, which raised prices by 5 percent in its U.S. bakery business this month, has said it may need to raise bread prices again if wheat remains near historic highs.

Many bakeries, including Breadsmith, have not yet fully passed on the rising cost of ingredients such as wheat flour, milk, and cooking oil to customers, possibly fearing sales would slow.

But as higher costs keep squeezing bakery margins, price increases across the board may be inevitable.Jill Rodriguez, a personal trainer having coffee with Ippolito on Thursday morning, agreed she also would curb her spending if prices became unreasonable.

"It's kind of like with gas prices, we don't drive as much now that gas prices are higher," she said.

Food industry analysts expect sales of staple bakery items such as bread to remain consistent even if prices rise, but purchases of nonessential goods such as cakes, pies, and pastries peobably would slow.

"It really depends on the consumer. The wealthy are not going to blink. They'll maybe complain about it, but in the end they'll pay," said Len Steiner, principal at Steiner Consulting Group, food industry consultants.

"Lower-income people will buy the staples and give up on some of the fringe items. They'll buy the bread but they won't have the pie," he said.

Any slowdown in consumer food purchases could be short lived.

"In the short term, consumers can fight it and they can walk away from the bread counter for a while," Steiner said.

"But eating habits are tough to turn around so in the longer run they're going to come back and pay what they have to to get the product," he said.