Consumers should be prepared to pay almost $20 or, in some cases, even more for a two-kilo bag of flour effective today, as they will have to fork out as much as 28 per cent more on the retail price of flour, the National Flour Mills Limited has announced.
While the country is already faced with exorbitant food prices and rising inflation, the NFM said yesterday that the cost of wheat has increased by a further 49 per cent in 2022 due to the ongoing war in Ukraine, leaving it with no choice but to increase its prices.
According to the NFM, a two kg bag of Ibis flour, which was $14.77, will now cost $18.93, an increase of $4.16 or 28 per cent.
This comes less than six months after NFM announced an increase in the price of its flour.
Depiste this, global wheat prices fell yesterday, coinciding with forecasts of favourable harvests and production ahead in major wheat producing countries, including Russia, according to a report in Bloomberg.
In a release issued yesterday, however, NFM CEO Ian Mitchell described the global situation as “the most turbulent period for wheat supply and food security in recent history.”
The company advised that while flour is the main ingredient in a range of food items, it is “not the only one, so an average increase of 28 per cent in the retail price of flour should not necessarily translate into a 28 per cent increase in the price of everything that contains flour.”
However, when the NFM raised its prices in January this year, this resulted in a rise in related products like bread, doubles and pastries.
But the company yesterday assured that it has been able to secure sufficient wheat stocks to guarantee that Trinidad and Tobago has an adequate supply of flour for the remainder of 2022.
But it explained that its latest move was to ensure the company remains viable.
“As a result, to reduce losses in its flour division, National Flour Mills has had to increase the wholesale price of flour by 33 per cent, with a suggested increase averaging 28 per cent on the retail price of flour to the consumer,” the company said.
It added that this decision followed continued initiatives to reduce operating costs to maintain the price of flour, in the face of increased supply chain challenges and soaring commodity prices.
Regional flour price comparison
The company added that the emerging crisis in eastern Europe and the decision by India and at least seven of the world’s wheat suppliers to curtail exports, saw a reduction in the quantities available to non-producing nations like T&T and resulted in dramatic increases in the price of wheat globally.
The NFM further explained that this “geopolitical hurricane” has caused Spring Wheat futures to jump from as low as US$8.55 per bushel in January 2022, to as high as US$14.06 per bushel in May 2022, an increase of 64 per cent in four months. This also represents a 138 per cent increase in Spring Wheat futures from US$5.90 per bushel at the beginning of 2021, the company added.
Acknowledging that flour is an important ingredient in local diets, Mitchell said while the NFM has been able to secure wheat to ensure a reliable supply of flour, the next few wheat shipments have been purchased at “record high prices” due to the crisis in Ukraine, coupled with decisions by many exporting nations to halt the export of wheat.
Still, he said the company hopes to mitigate these effects.
“We continue to explore ways to improve the efficiency of our operations and manage those costs that we can control. While we are acutely aware of the knock-on effect that an increase in the price of flour could have in the market, we must ensure that there is product available on the supermarket shelves. We must also ensure that we can generate enough positive cash flow and operating surplus to pay for these raw materials.”
NFM prepared to drop prices if wheat cost declines
Should the price of wheat return to its previous levels, however, NFM said it will be prepared to reduce prices.
“NFM operates in a competitive environment, and we are continuously exploring ways to improve our levels of efficiency and to ensure the consumer gets the best value for money.
“Trinidad and Tobago has traditionally produced flour at competitive prices compared to other CARICOM countries and we will seek to maintain this position,” the company added.
And while the price of wheat has increased more than 49 per cent for 2022, NFM has increased prices by about 33 per cent.
On whether this price increase was sufficient to cover the increase in costs, the company said, “While we have not passed on the full increase in cost, we are confident that other internal initiatives to improve operational efficiencies will allow us to manage operating performance to make a profit with a 33 per cent increase in price.”
On whether consumers can also expect increases in the prices of other NFM products where wheat is a raw material input, the company said this will be determined by factors beyond NFM’s control, such as the price of raw material and shipping.
However, it said it will continue to focus on the items within its control and do everything to secure supplies and run an efficient operation, keeping its milling and processing costs as low as possible.
It added that if the price of wheat falls, this will be passed on to consumers.
Regarding an increase in the price of grain, the NFM is yet to make a decision. The company said like all importers of raw materials, the NFM’s pricing reflects the prices on the world markets.
It said it will continue to do what it can to manage the volatility in the market and will act “in a responsible manner in the best interest of our customers and all other stakeholders to minimise the extent to which increased global prices affect the end price of our products.”
That said, the NFM maintained that continued significant upward shifts in prices will impact the price of flour locally.
“Ensuring that food is available to the people of Trinidad and Tobago is our paramount responsibility,” the company added.
Source: Spring Wheat May ‘22 Futures BarChart - Barchart.com
Supermarket Association: Global situation taking toll on prices
In response to the increase in flour, Supermarket Association of T&T president Rajiv Diptee stated: “We have been monitoring the prices of grain and wheat as described within the release and it has been soaring for some time, so the fears have now been confirmed and unfortunately, we are seeing that the State’s producer, the largest producer of flour in the country, National Flour Mills ,signalled its price increase and they are passing the prices on right now to the trade which will have to be passed on to the customers.
“And it is something that while we feel the timing is very unfortunate, it reflects the global situation right now where we have had a consolidation of factors from the pandemic brought forward, as well as the war in Ukraine taking the toll as it has on the supply chain to date.”
Diptee said the situation perfectly highlighted that supermarkets are “price takers.”
“We feel very strongly and I will say I do personally as well, where the food security projects are very critical to ensuring that we have some sort of leveraging of giving ourselves a hedge fund against the rising prices internationally, because these situations show us how susceptible we are to what is taking place outside of T&T and how a war in a European country can continue to affect us as well as the pandemic,” he said.
“As far as agriculture is concerned, there are projects that can have great benefits and use and within the intra-regional basin, there must be an appetite as well as domestically inside of T&T to see what can be done.”
Diptee said the ongoing situation needs to be seen as a learning tool.
“We have had to learn from this experience that we need to be able to provide for ourselves where wheat varieties are concerned, where several of these projects perhaps may be feasible in the medium term and it is something that we have to prioritise,” he said.
“What I am very happy about right now to note is that NFM is also saying that there is enough cover for supermarket shelves for the remainder of 2022 so we have that time to work out what is our strategy.”
