The Price Of Bread : Planet Money Inflation is at its lowest in more than 50 years.
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The Price Of Bread

Whither wheat: Click for chart back to 1989. Alan Cordova/NPR hide caption

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Alan Cordova/NPR

Whither wheat: Click for chart back to 1989.

Alan Cordova/NPR

Inflation is falling at the fastest pace in more than half a century, the Labor Department reported today. The Consumer Price Index has fallen .4 percent over the past 12 months. If you're worried about deflation, consider that core inflation — which excludes food and energy — chimes in at 1.8 percent over that same period, .2 in the last month. Which is better than zero.

Led by a steep decline in dairy, food prices fell .1 percent last month. This has been a lousy time to be selling much of what's grown on farms. Alan Cordova has tracked the drop in agricultural prices, with a particular eye to the effects on our daily bread. After the jump, his own "bread/wheat multiple" and what the heck it means.

Explanation below: Click for bigger chart. Alan Cordova/NPR hide caption

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Alan Cordova/NPR

Explanation below: Click for bigger chart.

Alan Cordova/NPR

Cordova writes:

I looked at the relationship between bread and wheat prices by creating a ratio of the two, dividing the per-pound price of whole wheat bread and white bread by the per-pound price of wheat. The result is the number of times more expensive a pound of bread is than a pound of wheat.

At the same time that the price of wheat spiked, the multiple dropped. This means the cost of wheat became a much larger component of the price of bread: in the case of whole wheat, it went from 1/22 (4.5 percent) to 1/11 (9 percent). In a commodity sector, such spikes can have huge consequences: sometimes the jump can wipe out a company's entire profit margin.