When wheat shortage hurts bakers, it hurts everyone

The bakers of this country are hurting, and therein lies a warning about what may lie ahead for U.S. agriculture.

About 80 of them were in Washington recently, visiting congressional offices, the White House and U.S Department of Agriculture, and issuing a three-point plan for alleviating the "current crisis" of high wheat prices and shortages.

The American Bakers Association favors slashing acreage in the federal Conservation Reserve Program to free more land for wheat production; waiving the just-enacted biofuel requirements if necessary to head off severe economic harm and "giving priority to the needs of the domestic food industry" when U.S. wheat stocks drop too low.

Such a call for government intervention in the farm economy seems strangely anachronistic in today's booming, globalized agriculture.

We've seen blips before. High commodity prices invariably cause a backlash from consumers, the livestock industry, advocates for the poor and importers overseas. They demand "action" from politicians to help ease prices and curb shortages. Farmers respond by increasing their crops. Soon enough the situation corrects itself and we're back to low prices, surpluses and farmers saying, "We told you so."

Yet what is occurring in the markets, and in American agriculture, feels different this time around. That's why it's important to take the bakers seriously.

Hundreds of millions of people in Asia are flooding into urban centers where they can be fed more easily by imports than by inefficient farmers in their own countries. Incomes are rising and people have the money to buy more bread, vegetable oils and meat, best supplied by global trade.

In the United States and Europe, stepped-up requirements for the use of biofuels is another new factor that is building a higher floor under prices. (There was no such ethanol mandate when Congress wrote the last farm bill in 2002.)