NFM blames Ukraine war for 33% price hike – FLOUR RISE$ AGAIN

NATIONAL Flour Mills Ltd (NFM) has raised the price of its wholesale flour for a second time since January, by a staggering 33 per cent, with a suggested retail price increase of 28 per cent, as of today (Wednesday).

As a result, consumers can expect an increase in the price of many basic food items where flour is a main ingredient.

The announcement came after NFM stated it was able to secure sufficient wheat stocks to ensure TT has an adequate supply of flour for the remainder of this year, at a 49 per cent increase in cost.

In a release, NFM said the direct impact per month on consumers, if a typical family uses four two-kilos bags of flour per month, could be a total increase of $16.64, with an increase of $4.16, or 28 per cent, from $14.77 to $18.93 for a two-kilos bag of Ibis Flour.

“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,” NFM said.

MOST TURBULENT TIME

CEO Ian Mitchell said this is the most turbulent period for wheat supply and food security in recent history, due to the emerging crisis in eastern Europe and the decision by India and at least seven of the world’s wheat suppliers, to curtail exports, meaning reduced availability for non-producing countries like TT.

“Flour is an important ingredient in our diets in TT and in response to the challenges we are facing, we have been able to secure wheat to ensure a reliable supply of flour. However, 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.

“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 there is product available on the supermarket shelves. We must also ensure we can generate enough positive cash flow and operating surplus to pay for these raw materials.”

The company said if wheat prices go down, it is prepared to reduce flour prices.

“TT has traditionally produced flour at competitive prices compared to other Caricom countries and we will seek to maintain this position. Most of the countries in Caricom have increased the price of flour at least once this year.

"However, even with this (33 per cent) increase, flour in TT will still be on average, 19 per cent cheaper than it is in other Caricom countries,” Mitchell said.

It said wheat prices are at record highs, but NFM has not passed on the full increase as it is aware of the impact this would have on most consumers. However, it said continued significant upward shifts in prices will impact the price of flour locally.

“The current geopolitical hurricane has caused Spring Wheat futures to move 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,” NFM said.

NFM said it was confident that internal initiatives to improve operational efficiencies will allow it to manage operating performance to make a profit with a 33 per cent increase in price. The company posted a loss of $783,000 in the first quarter of 2022, ending March 31.

HIKE WAS NOT UNEXPECTED

Linda’s Bakery owner Peter George said the announcement was not unexpected. He said Linda’s did not plan to raise prices in the short term.

“Linda's held bread prices for several months following the first increase, we only raised prices on a few items and now we’re faced with this. We’re obviously going to have to look deep into the business and see what the impact is going to be.

"In a bread business like Linda’s, where flour is 70 per cent of your input, when flour goes up by 33 per cent, it has a substantial impact on the price of the item,” George said.

He said people need to be cognisant of further increased pressure on critical food items, including flour, chicken, eggs and dairy.

“It’s going to be a tough next couple of months when it comes to food prices. I don’t think this is going to stop and there’s nothing we can do. At some point, the absorption rate is going to begin to dry up, there’s only so much an economy can do.”

Chee Mooke Bakery’s general manager Stokely Phillips said a jump in flour prices means an automatic increase in product prices. He said raising prices was traumatic for consumers and businesses as the knock-on effect was unpredictable.

TT Supermarket’s Association president Rajiv Diptee said supermarkets did not have a choice when it came to raising flour prices, as they had to take the price set by NFM.

“They are suggesting that the wholesale increase is 33 per cent, and they are also saying the suggested retail price per two kilogramme is 28 per cent, so the margin left for the retailer is not a lot.

"Supermarkets would also be sharing in the absorption of these costs because it’s a situation where we also have increasing costs in the stores, so that is something we look at from our perspective. We will also be sharing the burden of adjustment for the customers.”

NFM increased its prices for flour in January 2022, with products increasing by 15-22 per cent. The Ministry of Trade and Industry intervened and the company reduced the rate of increase for Ibis to 17 per cent from 19 per cent and to ten per cent from 19 per cent for Hibiscus flour. Feed prices went up twice in 2021.