Friday, 16 July 2010

Does a loaf of bread have to cost the Earth?

"Prices can't keep rising all the time, can they?" said that same vague City analyst of the other day (here).

Well my mate Fat Yuri reckons they can and this is what he said on the matter; just before he slipped in to a vodka induced marathon sing-a-long and once he’s on one of those you just can’t get any sense out of the bugger, sometimes for days on end.

“You can make about 1,250 standard loaves out of one tonne of wheat which is worth about €1,500 retail” he said.

"Wheat is trading today at a 22 month high of about €175 per MT” continued Yuri.

“Mr Farmer has huge amounts of capital tied up so he can plant seed and nurture it risking ice, snow, frost, rain, drought, hail, pest, disease, fire and theft to sell at just above the cost of production which might be less if the Government decides to mess about with the market.”

“His wheat is then turned in to a loaf and sold at about 850% mark up.”

He went on, "half the environmental damage today is caused by farmers having to produce food at the lowest possible unit cost in order to try and achieve some sort of margin so they can carry on trading and if wealthy consumer spent more on their weekly shopping bill rather than fags, booze (I thought this was a bit rich) and glossy magazines then the world would be a much, much better place!” Blimey Yuri.

Fat Yuri then went on with “If I were a rich man, Ya ha deedle deedle, bubba bubba deedle deedle dum…all day long I'd biddy biddy bum…if I were a wealthy man.”

I lost Yuri at this point, but you get his sentiment.