Consumers and wholesalers paid more for bakery needs in 2022

KANSAS CITY — From the start, 2022 promised to be a rough year for both consumers and commodities markets and was especially disruptive for the baking industry and ingredient prices due largely to surging inflation, stubbornly strong consumer demand and a pandemic-ravaged economy.

Not to be undone by the COVID-years, 2022 brought its own special class of disruptors with Russia’s invasion of Ukraine on Feb. 24, the record-shattering avian influenza outbreak, drought-induced water levels on the Mississippi River leading to barge backups, two force majeures resulting in extremely tight sugar supplies and a barrage of other stumbling blocks from labor issues to potential nationwide rail transit shutdowns. All of it set the stage for mostly higher prices on baking ingredients with some ingredients reaching multiple all-time highs in one year.

Flour, the backbone ingredient of the baking industry, saw major price advances in 2022, stemming from reduced flour production, which hit a nine-year low in 2021. After Russia invaded Ukraine in late February, US and global wheat futures surged. In April, bread flour prices hit 14-year highs. Prices cooled over the summer after Ukraine, Russia, Turkey and the United Nations collaborated on humanitarian efforts to resume grain exports from Ukraine’s embattled Black Sea ports, but global tensions continued to support firm prices.

Year-over-year, consumer prices for a 5-lb bag of flour rose to $2.44 in October, up 20% from the same period last year, according to the US Department of Agriculture’s Economic Research Service using US Bureau of Labor Statistics average price data. Kansas City bakers standard patent for food manufacturers was raised 80¢, or 3.5%, to $23.90 per cwt this year.

Eggs, another staple ingredient for the baking industry, were ravaged in 2022 by the worst outbreak of highly pathogenic avian influenza (HPAI) on record. The first cases of HPAI were documented in February and haven’t stopped since, sending the price of shell eggs soaring to five all-time highs. The USDA said a dozen eggs in October rose 59% to $2.64, up from $1.66 during the same period last year. Prices for dried whole eggs rose a staggering 259% to $13.65 a lb, up from $3.80 a lb in 2021.

Sugar was no stranger to price volatility in 2022. After one major beet sugar supplier declared a force majeure in April, sugar prices soared to their highest levels since 2011. With limited supplies and wet weather delaying beet planting in the Upper Midwest, sugar imports were increased during the summer to boost supplies, but prices kept climbing to multi-decade highs. A second beet processor declared force majeure in the fall. The USDA said a 4-lb bag of sugar in October retailed at $3.08, up 10% from $2.79 in 2021. Prices were 44% higher at the wholesale level.

The bullish dairy market started 2022 with nonfat dry milk prices at 7½-year highs, which cooled in later months, with year-over-year values declining about 1.2%. But consumer milk prices remained firm at the retail level. The USDA said a gallon of milk in October was $4.07, up 16% from $3.51 during the same period last year.

Butter prices were higher this year. CME Group butter prices set record highs in the fall near $3.25 per lb on good demand and tight supplies. The USDA said 2022 retail butter prices rose 20% to $4.32 a lb in October, compared with $3.61 in October 2021. CME Group wholesale butter in October was $3.14 a lb, up 62% from $1.94 a lb a year earlier.

While market movers influencing 2023 prices are still unknown, this year’s volatile foundation already is providing support for high prices in the new year with winter wheat entering dormancy in poorer condition than it did last year, a continuing Russia-Ukraine war with no established path for conclusion, reducing but still high inflation, and a slowing global economy.