135 Route 5 South
Norwich, Vermont
05055
www.KingArthurFlour.com
802.649.3881

February 21, 2008    

Due to the extreme volatility in the US Wheat Futures markets we recognize the need for more information regarding the rapidly increasing cost of flour.

Four fundamental factors are driving the price of flour upward:

1. Very strong worldwide demand for US wheat: unprecedented quantities of US wheat is being exported abroad.
2. US wheat stocks (supply) are at an all time low. Think of wheat stocks as our wheat “bank account”. Wheat stocks represent all the wheat we have currently available for all uses (ie for milling into flour, feeding to animals, etc).
3. The result of points 1 and 2 is that our ‘stocks to use’ ratio is at an all time low. Said another way: demand is outstripping supply which puts strong upward pressure on prices.
4. And finally, the weak US Dollar makes US wheat very competitive on the world market. This drives point #1

The results of these 4 points can be seen in cost of a bushel of wheat as indicated by the chart below:

As flour is milled from wheat the cost of wheat directly influences the cost of flour. The chart above is the clearest representation of why the cost of flour has increased so dramatically over the last year (the right hand side of the chart). While it is commonly believed that these prices are not sustainable in the long term, short term they are the reality we all must deal with, and plan for. There is some hope that prices will ease late in the summer, but it is safe to say that we will not be returning to the low prices we enjoyed for so many years.

Please feel free to contact me with any questions regarding these matters.

Tod Bramble
King Arthur Flour - Northeast Bakery Flour Sales