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Russian Wheat Price Increased – Will Bread Price Rocket in Georgia?

Russian Wheat has increased. 90 percent of the wheat in Georgia is exported from Russia. The experts say that the reason of price increase is a result of Russian ruble devaluation. In parallel with, pricing policy is changing in the countries producing the wheat (US, Argentina etc).

The current pricing trend of the Food and Agriculture Organization (FAO) shows that the monthly index of cereal prices has increased by 1.7 percent that exceeds by 15.4 percent of the same period of previous year.

Caucasus Business Week was interested in the current situation on the market, whether wheat and flour price will increase and as a result the bread price.

Levan Silagava, the head of the Georgian Wheat Association is not expecting bread price increase in the coming months but he can’t assure if the price will stay the same depending on the current economic picture.

As for the next two months forecasts – Levan Silagava says that the price of the wheat and flour is likely to increase though the bakers will not raise product price because of the remain margin.

Here are two factors. The positive picture is that, in Russia, the harvest was enormously prolific last year. So, the quantity of the transient stock is high. Plus, this year harvest and it gives us the stable picture. The price of wheat is positive too. Mainly, the price of the wheat usable for the bread flour amounts 34-35 GEL. The maximum price with bakers is about 42-43 GEL. Currency fluctuation must be catastrophic – maximum point to get bread price increase. The negative factor is exactly this– combination of dollar with GEL and Ruble. Since we have much positive factor, increasing of bread price will not happen,” – Silagava explains.

Malkhaz Dolidze, the head of the Bakery Products Association does not share Levan Silagava’s opinion. According to him, the existing situation of the international market affects domestic market as well. Accordingly, the price of wheat and flour will increase and this tendency will directly reflect bread price.

I am not announcing that bread price will raise. Make judgments yourselves. It is fact, the wheat price is increasing, generally, corn price, that makes flour expensive. All this impacts on the bread price. As for the bakers margins as if they have a huge reserve. It is not like that anymore. From taxes to phytosanitary among them, all presses on us and what margins we will have?  – Dolidze states.

Making predictions is not hard – shares Nugzar Goniashvili, the head of bakery company Margi.  – moreover, process of increasing cereal price has already begun on the domestic market and will raise more in the future”, – he adds.    

It is not difficult to predict all this. When grain price is increased on the international market, of course it is increased here too and will increase more. I can’t give an exact response regarding bread because it is the most demanded product and it is not easy to have any specific position. As for wheat and flour. Perhaps, the mills have certain amount of supply, but eventually, it will run out and they will have to buy product with a new price. Ultimately, wheat and flour price will increase drastically,” – Goniashvili says.

Arisi Bochoidze, director of company Ifkli says that they buy raw material for producing white bread from Georgian mills.

“At this moment, price of the one sack flour we use, has increased by one. Because we are not that flour importer on the Georgian Market. We can’t say if the price growth policy will continue though wheat price growth on the international market is reflected on the imported wheat and then flour price.

Bread’s final price depends on the raw material and energy resources. If raw material price increases, it affects selling price of bread. At this time, the flour price is not scary that we should review bread price at Ifkli. If the price increasing will continue and become systematic, then we, bread producing companies, will have to examine bread price.

Little changes don’t affect products because during a year we have opportunity to estimate the price of the product and be ready for the minor changes in the ingredient price. Besides, we always try to maintain unaltered price on the product as long as circumstances allow us,’ – states Arisi Bochoidze.

Director of Ltd Mkhneoba Giorgi Siprashvili says that they use only local produced wheat and does not rely on imported product. He adds that price correction is not planned.