The recent news about the wheat price hike poses a crunch for French agricultural exporters. As they scramble to find alternative markets, some of them are finding it tough to pass on the higher costs to their customers. Some say that it is difficult to pass on the cost to consumers but experts question whether the new wheat prices would pass the cost onto customers anyway. They also point out that this is not the first time that wheat prices have risen. Other studies have shown that global wheat trade has been affected by factors such as the financial crisis.
Experts believe that the bad harvests in Russia and China were responsible for the sharp drop in the prices of wheat. This has prompted farmers to pass on rising prices to consumers and the impact has been felt in the bread industry. Wheat traders have reduced shipments and some even stopped trading. This has had a significant impact on the demand for wheat throughout the world. Bread makers who are facing difficulties in meeting demand have resorted to increasing their supplies in order to meet demand. However, the impact on the French food market, the world's biggest bread producer, is not as yet known.
There is no doubt that wheat prices have increased as global commodity prices have continued to rise. The upside to the bad harvests in Russia and China however, remains. The current supply problems in these two countries have forced wheat prices to continue to rise. This is posing a crunch for French wheat exporters, especially those involved in wheat exports.
There is no doubt that the supply problem in China and Russia has resulted in higher production costs for farmers there. For France, the impact on its wheat prices has been relatively small so far. This is because the country does not rely much on exports. It depends more on domestic production to meet domestic demand. This means that any increase in production would only be offset by an increase in consumption.
As a result of the price hikes in wheat, some French bread manufacturers have re-stocked stocks in anticipation of further increases. But this, unfortunately, only helps to worsen the situation. In other words, if there is no further demand, then no amount of re-stocking will help. The situation is similar to that of the food price bubble which popped in the United States when demand outstripped supply.
To understand how wheat prices will interact with the price of baguettes, it is necessary to understand what makes baguettes unique. Unlike ordinary breads, baguettes have very thin crusts. They are hand kneaded using very fine wheat flour. This special wheat flour gives baguettes their distinctive sweet taste.
The current price hike poses a crunch for the French baguaise buyer. While baguettes are certainly cheaper than their wheat equivalents, the buyers do not necessarily want to sacrifice quality for price. If the prices continue to stay at current levels, then they would probably have to make do with lower quality breads. This would hurt the French bread manufacturers very badly. If the price of wheat were to continue to rise, then the lower quality products would not be able to sustain the same profitability levels.
In short, the recent rises in wheat prices is a crunch for the French bread industry. But there is still hope. Recent surveys suggest that the consumer is still willing to pay a little more for baguettes. There are various possible reasons why the market has not yet reached a saturation point, but supply and demand are still strong.