Baked goods and cereals cost 16% more in December. What gives?
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Annual inflation came in at 6.5% in December, making six straight months of diminishing price increases. Though prices are still rising, those increases have been getting smaller.
But then there’s food. It’s up 10.4% and has risen faster than overall inflation each month since July. That’s particularly true for cereal and baked goods. Even cookies — yes, the Bureau of Labor Statistics actually tracks cookies — are up 18%.
So why are baked goods costing so much more dough?
A good number of ingredients go into doughnuts: Flour, milk, sugar and, of course, love. But the secret ingredient is inflation. Donna Siafakas has owned Peter Pan Donut and Pastry Shop in the Greenpoint section of Brooklyn, New York, for 30 years.
“The ingredients have gone up, and the one I would say the most is eggs,” she said. “At one time, they were 99 cents a dozen, and now they’re close to $4 a dozen. That’s wholesale.”
Flour’s up too. So are a lot of things. “I used to pay $47 for a cube of shortening,” Siafakas said. “Now, it had gone almost to $100 a cube. Now, it’s settled, it’s like in the $80s.”
Siafakas said she’s absorbed the costs as much as she can. During COVID, she refused to raise prices. “But when COVID settled down, we went from $15.99 a dozen to $17.99 a dozen, ’cause everything was ridiculous.”
Baked goods are special, in a way, because so many of the main ingredients have seen exceptional inflation. Eggs are up, in part, because bird flu has killed 60 million birds. Plus corn futures and soy and wheat are all trading near record highs, according to Naomi Blohm, senior market adviser for Total Farm Marketing.
“Supplies of food, not only in the world but in the United States, are still tight from year-ago levels,” she said. “It’s not gonna get fixed quickly. It’s gonna take perfect weather this spring and summer in the United States to get it fixed.”
It’s not just weather and bird flu that have driven up prices; there’s also demand.
“When we look at the holiday period we’re just coming off of, that’s where a lot of the baking takes place, so there’s increased demand,” said David Ortega, a food economist at Michigan State University.
Finally, doughnuts are sticky … and so are the prices of food basics.
“The prices of these staples tend to go up when the price of inputs go up, but they don’t change downward,” said Colin Carter, a professor of agricultural economics at the University of California, Davis. “They’re sticky in terms of moving downward.”
Back at Peter Pan Donuts, Donna Siafakas refuses to raise the price of a cup of coffee, at least. It’s $1, she said, and always will be.
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