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Bread Prices Rising as Cost of Flour Spikes

Tuesday, 22 Feb 2011 | 4:20 PM ET

At Boudin Bakery in San Francisco, flour, the main ingredient used in the 25,000 loaves of bread baked daily is naturally key to its success. But now Boudin, this coastal city's oldest business, which opened during the Gold Rush in 1849, is battling a wheat rush. And that rush is pushing Boudin's flour costs to the highest level in years.

"Two and a half years ago, we saw the same kind of spike, different kind of conditions," said Boudin Chairman Lou Giraudo. "The situation is much worse today. We've seen a 95 percent increase over the last few months."

Inflation Bites at the Bakery
A look at how businesses that need wheat and sugar are dealing with rising prices, with CNBC's Scott Wapner.

At Boudin's two bakeries in San Francisco, bakers use 200,000 pounds of flour each week. In July, flour cost the company about 14 cents a pound, but today, it's running nearly double that, at 26 cents a pound.

That jump forced the company to institute a price hike at its Boudin Bakery Cafes in November. And also wholesale clients, including Costco , started paying more for Boudin loaves of bread at the end of last year.

"We've already raised our wholesale prices 6 percent," said Giraudo. "We've raised our restaurant prices for our own restaurants 1.5 percent, and we'll probably see about 20 to 30 cents [more] a loaf at the retail level in the next month or so."

The company is waiting until the second quarter to decide whether to push the prices even higher.

On Wednesday, February 23, Scott Wapner reports from Texas on the effects that the rising cost of cotton, used for towels, sheets and other linens, are having on a major hotel company. Look for his story during "Squawk On The Street" at 9am ET on CNBC.

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