Банкеръ Weekly



Bread prices in the country have increased by some 12% on average since the beginning of November, data of the branch organisations show. Instead of being hiked to about BGN0.81/kg as announced in September-October, bread currently costs BGN0.94/kg. Other baker's goods have also been hiked. According to traders, nothing can now stop prices from going up. Agricultural officals' hopes that the State's intervention in the grain market could steady the prices, proved unrealistic. After the first 94,000 tons from the State Reserve were sold out, millers realized they were buying poor-quality wheat and would have to accept the off-the-counter prices of BGN300-320/ton before VAT. This reflected on the flour prices, which reached BGN600/ton after VAT for Grade 500 and BGN560/ton after VAT for Grade 700. The lack of milling wheat import also had a negative effect, despite the multiple assurances of the Ministry of Agrilcuture and Forestry that negotiations were being held and even prices had been specified. At the present state of the European and global market, however, even if there is import it will be very expensive and will hardly be competitive to the prices of Bulgarian wheat. Not many options for gaining command of bread prices have remained to the Government. If a large amount of milling wheat from the State Reserve is offered on the commodity exchange, e.g. 200,000 tons at a time, this would delay the leap of bread prices by at least two of three months. But the question is if such an amount is available in store. The other option is to close the negotiations for import as soon as possible, to make public the agreed quantities and the schedule for their delivery, and to voice an intention for intervining in the market again. This would force traders and producers who keep milling wheat in warehouses to begin large-scale sale at prices, lower than the current ones. If the State remains idle, bread prices will continue to go up, reaching about BGN1.20-1.50/kg. But at these rates, most of the small bakers will face difficulties and even bankruptcy, as they will be most tangibly affected by the expected shrinkage of overall consumption.

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