If grain prices are down 22.5%, why are we still paying the same price for bread?

Perhaps I’m just stupid. But could someone explain to me why food prices are still rising in the supermarkets, while prices at producer level have been falling for months?

According to the latest producer price index, the prices of agricultural products and manufactured food fell in September, in the case of agricultural products for the second month running. The producer price of processed food – that is, the price at which manufacturers supply retailers and wholesalers – is now almost 2 percent lower than a year ago, while the prices of agricultural food products have fallen on average by almost 6 percent.

In the case of some commodities, prices have plunged dramatically. The price farmers get for grain, for example, is now 22.5 percent – almost a quarter – lower than a year ago. And the price of flour is down 12 percent. Yet, in the supermarkets, the prices of bread and cereals have declined only 2 percent over the same period, according to the latest Consumer Price Index.

Let’s get this straight: the farmer is getting 22.5 percent less for his wheat. The miller is getting 12.1 percent less for his flour. The supermarket is charging just about the same for your loaf of bread.

Meanwhile, the supermarkets continue to rake in record revenues, despite the worst recession in decades. How is that possible?

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