ECONOMYNEXT – A group of bakers in Sri Lanka has called for wheat flour price controls after placing the Consumer Authority on egg producers, disrupting the sector which has been hit by high food prices for poultry and increasing the risk of selling layer chicks for meat.
Sri Lankan wheat prices have soared amid foreign exchange shortages that have hit flour milling companies and a ban on wheat flour exports by India amid a global rise in wheat due Federal Reserve money printing and disruptions to wheat exports from Ukraine as well as controls on open account imports.
The rupee also fell from 200 to 360 against the US dollar after the central bank printed money for two years to stimulate growth (output gap target).
Price signals
Namal Perera, chairman of the Southern Province Small and Medium Bakers Association, told reporters that major importers are still giving wheat at Rs 283 per kilogram.
“In the recent past, the price of a kilo of wheat flour fluctuated around 425-450 rupees,” Perera said.
“The wholesale price of wheat flour is said to be Rs 297 per kilo in Pettah market. But when it goes to the provinces it’s 360 to 375 rupees. There are all kinds of prices on the market.
“I heard that friends of a bakers’ association had imported wheat flour from Turkey. There is an opinion that it can be given for 325 rupees.
Perera did not explain why he could not buy from major suppliers at Rs 283 per kilogram.
However, wholesalers say major suppliers do not have enough inventory at the price and are issuing limited volumes from stock purchased earlier. Some also have supplier credits on wheat purchased when the rupee was around 200 to the US dollar.
Importers confirm that Turkey is currently the cheapest source of wheat flour. However, it is not easy to get wheat flour from Turkey, which grinds Ukrainian and Russian wheat.
Instead, the wheat is bought in Dubai or Oman, which are more expensive. Some grades of wheat flour are also more expensive.
“Turkish wheat rose again when Russia launched a missile attack on kyiv and other cities,” an importer said.
When domestic prices rose to 400 rupees, importers also bought finer wheat flour of higher quality, such as those used to make cakes, which were available but at a higher price.
This is how the price signals should work, with high prices bringing supplies at different levels.
Meanwhile, the bakers’ association is calling for wheat price controls to lower the price of their bread.
Unlike the wheat flour market where there are different prices, bakers’ associations practice price fixing by announcing price increases at press conferences, regardless of their actual costs.
No action has been taken against the associations for collusive behavior.
Meanwhile, bakers did not seek price controls on their products.
straight face
“If a fixed price can be set for wheat flour for price and quality, we can also reduce the price of bread by a certain amount,” Perera said with a straight face.
Bakers previously set the main price control agency, the Consumer Affairs Authority, on egg farmers calling for egg price controls.
Poultry farmers have been hit hard by rising maize prices due to a poor harvest, import restrictions and also a ban on open account imports.
The CAA has a history of acting against the poultry sector by controlling prices. The sector had been battered by import restrictions and corn protectionism for years.
There is a politically powerful lobby of collectors (commonly referred to as the Corn Mafia) that pushes for protectionism and high-priced domestic corn production. (Colombo/October 16, 2022)
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