Банкеръ Weekly

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STATE IN PANIC - BREAD PRICES ARE RISING

The consecutive economically illogical rise in bread prices is going to turn into a number one problem for the government. Among the numerous at first sight reliable arguments on the metter there are real pearls, for example - producers want BGN220 for the new harvest. It is extremely normal for Bulgaria bread prices to turn upwards only because of rumours, as the market is rather sensitive. This is natural in terms of decreasing demand and shrinking consumption of main foods, explain experts. The deputy minister of agriculture Boiko Boev also add his version in interpreting of bread prices. He said that they had not been increased since 1997 and thus their rise was normal. In 1997 however Mr. Boev was not in the governmen and has obviously forgotten that the grain price was BGN230 per tonne. Since then the price of grain is constantly below that ceiling, but bread prices did not drop even when grain was sold at BGN110 per tonne. Instead of asking why bread prices have been so unnaturally high in extremely long period of time (since 1997 on), while main stuff prices were dropping, the deputy-minister is happy with the market stability.It is clear long ago that we'll buy more expensive bread - there were many attempts for price changing in all these 6-7 years of stability. It seems today that at last the conditions for this move are favourable also in state institutions which should justify the price increase. The bread price however is not the only problem - the same trends also appear for milk, diary products and meat. And all that results from the fact that grain is a base good in the feed line and the wheat and fodder prices depend on it. How much will prices jump is difficult to be assessed. Yet in Bulgaria works one flawless market rule - when prices of a good rise, its demand drops. Which, however, does not mean that people will be eating pastries instead of bread. Ordinary tax-payer will simply consume less bread. When the bread produced could not be sold and traders and producers begin to suffer losses they will cut production and profits and things will go on their places. If, however, the existance of a normal market in Bulgaria is possible.

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