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The cost of eating goes up

Bakeries, schools, restaurants face a rise in food prices
by: Cliff Newell, Alice Seeger, owner of Upper Crust Bakery, is seeing first-hand that her expenses are going way up.

The simple things in life are getting more expensive.

A bagel, a slice of pizza, a thick piece of multi-grain bread, a heavenly sticky bun.

Certainly for all the folks who eat them, and definitely for the folks who make them in the Lake Oswego/West Linn area.

Rising wheat prices have gotten most of the media attention, but it's also cheese, vegetables and everything else necessary to make the delicious, healthy food we take for granted in bakeries, restaurants, pizzerias, and school cafeterias.

They remember the good old days - of even a year ago.

'Over the last year we've gone from $9 for a bag of flour to $18 a bag,' said Alice Seeger, owner of Upper Crust Bakery in Lake Oswego. 'Other varieties are more expensive. Some organic varieties cost $40 a bag. Honey has gone from $680 a barrel to $900. Eggs have gone from $18 to $40 a crate.'

'Wheat is one of the many, many food items that have increased,' said Shelly McDaniel of Lake Oswego's Cooking Accomplished, a specialty food business that will be closing at the end of this month. 'Our costs have gone up 30 percent since last year.'

'We paid $535 for a unit of Chuck E Cheese Dough Mix a year ago,' said Tom Maginnis of Lake Oswego, owner of the Chuck E Cheese Restaurant in Southeast Portland. 'Now we're paying $1,117.'

'The cost of our flour has gone up 36 percent from a year ago,' said Dominique Geluin, owner of St. Honoré Boulangerie in Lake Oswego and Northwest Portland.

Grace Earhart has been selling irresistible sticky buns for more than 21 years at Sourdough Willy's Bakery in West Linn, and she says, 'We're busier than ever. Don't ask me why.' She added, 'It's always a good day for a sticky bun.'

But rising costs afflict even busy bakers like Earhart.

'A year ago we paid $11 for a 50-pound bag of flour,' Earhart said. 'Now it's $22 a bag. Chocolate chips have gone from $50 a box to $59. It's terrible. It's horrible!'

The spiraling cost of wheat and other food staples is surely no Lake Oswego/West Linn phenomenon. Soaring gas prices get the most attention when it comes to living costs in the U.S., but food is right up there.

Here is just a sampling of headlines from newspapers across the nation: 'Wheat prices double, anxieties rise'; 'Bagel, pizza prices rise as flour costs soar'; 'Wheat prices hit record high'; 'Pizza and beer now cost an arm and a leg.'

What is even worse, such high prices are unprecedented.

'Prices were never this high,' Earhart said. 'I remember paying $15 for a bag of flour, but it didn't stay there long.'

'Food inflation has been going on for a year now,' said Dave Yudkin, for 20 years owner of Hot Lips Pizza, a leader in sustainable food practices. 'Previously I would see rises in commodities like cheese, but never across the board like this. Things aren't severe yet, but it's certainly noticeable.'

'This is the first time I've seen the price of flour this volatile,' said Mark Wood, manager of Pizza Bella, a pizzeria held in high esteem by gourmet pizza lovers of the Lake Oswego area. 'A year ago we were paying $12 for a bag of flour. This year we've seen it rise as high as $38.'

A veteran of 20 years in the food service business, Wood said, 'In the year 2000 I was paying $6.95 for the same bag.'

Such figures make consumers respond with a three-letter word: Why?

There are many reasons.

'There were droughts in Australia and other countries that grow wheat,' Yudkin said. 'The value of our dollar dropped significantly, we had to bid higher for wheat.'

Geluin said, 'My 2 cent answer is with the dollar so weak speculators are now investing in commodities like rice, wheat and even oil. That creates inflation on the pricing. Then there's the surplus demand from China and India, bad crops. There are several factors.'

'They don't have the reserves like they used to on wheat,' Earhart noted.

In addition, ethanol has been on the hot seat for criticism, since more corn - and thus less wheat - is being planted to meet the demand to produce hybrid fuel.

But Seeger has some special insight into the dilemma. Prior to taking up a career in baking, she was a lawyer, and she does not like the practices in speculation that are now being allowed on the food commodities market.

'Historically, the food market was protected from this type of speculation, but now it is being allowed,' she said. 'Big corporations and big hedge funds create a fictitious demand, the same way the prices of houses were run up. If the rules were enforced, the prices would drop. Blaming ethanol is not fair.'

With her legal background, Seeger knows where to look for evidence, and using the Internet she has uncovered such interesting items as a letter from the U.S. Commodity Futures Trading Commission informing a corporation it had determined it would not recommend enforcement action on violations of regulations on corn, soybean and wheat futures.

'They're not hiding stuff,' Seeger said. 'But you have to go look for it.'

Even worse from the public confidence standpoint was the Wall Street Journal story last February, called 'Creamed by Wheat,' of hapless speculator Evan Dooley. He managed to almost instantly lose $141.5 million by betting wrong on the direction of wheat prices.

'To people like that it's Monopoly money,' said Seeger, shaking her head.

Relief from such speculation may only come with a new Presidential administration in 2009, but bakers and restaurateurs have to keep going. Right now, the future does not look bright for reeling in food prices.

'I'm too mean to quit!' Seeger said with a laugh. 'But it does affect me. I can't double my prices. Hopefully, people will buy a lot of product.'

Maginnis says his restaurant is continuing on 'the upward spiral' it needs to continue its success.

'We're doing fine,' he said. 'But for us this situation does make it hard to re-invest, which is the nature of our business. We're required to re-invest a ton of money. Recently, I put a half million dollars into the restaurant.'

'Any food service, if it's not at the top of its game, will run into problems,' Yudkin said.

Yudkin has seen the trend of the future, and he doesn't like it: Less food for more money.

'I went to a sushi restaurant which had these conveyor belts with dishes on them,' he said. 'There was a lot less rice and more filler stuff.'

No one is forecasting good times ahead, even with such prospects as a bumper wheat crop in Australia.

'I know the prices are going to rise again,' Earhart said. 'I can feel it.'

'We're doing the best we can to hang in there,' Geluin said. 'We're seeing a pretty serious effect on our bottom line, but we don't like to pass on the cost to our customers.

'It's hard to tell about the future. There is too much unknown. Unfortunately, no can tell if we're near the end of the tunnel.'

Food hikes hurt schools

Sharon Morgan realized just how much the rising cost of food meant to the Lake Oswego School District when she got the bill on her fall order.

'The bill was $15,000 higher than we anticipated,' said Morgan, food services director for the district. 'There it is. You have to pay it. Wheat prices are astronomical. Dairy, eggs, cheese. Everything is going up.

'This is the most change I've seen in my 30 years as a dietician.'

That certainly makes it tough for Morgan to make sure students at 13 Lake Oswego schools have a nourishing lunch, and the situation is quite for same for Cynthia Abel, food services director for the Wilsonville-West Linn School District.

'We're already over budget, and our revenue doesn't cover the cost of lunch,' said Abel, who has been in the food service business for 20 years. 'We've been absorbing the costs internally. The government is going to have to respond and that will take time.'

'Our lunch program is self supporting, so we have to pass it all on,' Morgan said. ' We've seen increases of 23 percent in four months. We try to find ways to be economical, and some of them for dairy, chicken and wheat are mind blowing.'

Abel has a double dilemma. Since becoming food services director in West Linn two years ago she has had a district wellness initiative to provide a more sustainable menu for students. That meant French fries were out, and pasta, rice, legumes and hot vegetables were in. Also out was white flour, replaced by wheat flour, which cost 12 percent more.