Rise in global wheat prices may be passed on to bread in stores
A global rise in wheat prices, of around 30 percent since just last month, may soon be passed on to the end-price of bread and other related products in Estonia, though this is not certain, one expert says.
Retailers say that no one had anticipated a rise in prices to that extent, which has mainly been put down to the cold spring, particularly in Russia, and which has devastated harvests.
Indrek Aigro, head of grain at trading company Copenhagen Merchants, told ERR: "We have had some cold weather in Russia."
"At present, Russia accounts for a quarter of the world's wheat exports, while conditions there have wiped out 10 million tonnes of wheat from the market," he went on, noting that this volume equates to 15 times the overall annual wheat harvest for Estonia.
Even before this shortage and resultant surge in prices, the situation at the start of April was already beyond what farmers would like to endure, Aigro added.
This followed a price fall however.
Aigro said: "Two years ago, we saw a major food inflationary spike, and since then, grain prices have fallen back to a very low level."
"However, in-store prices have not actually fallen yet. Retailers have been able to protect their sales prices very well; they haven't reduced any prices, and their profits have increased significantly as a result," Aigro continued.
Another issue, he said, is whether a slight increase in raw material input prices will translate to a rise in food prices – though this is by no means inevitable.
"Maybe it won't, since the profits retail trade is making can absorb the shocks. I think we were at too low a level earlier, so I see today's level as a corrected point, one where we should be at."
Anne Mere, CEO of Fazer Bakery Baltic, said that changes in raw material prices have certainly made their impact. Much also depends on when the price rise reaches the production stages.
According to Mere, there has been very little stability in recent years, with weather and the global grain market balance playing a role here.
She said: "When input prices go up, there undoubtedly follows pressure to raise prices. On the other hand, the competition in the bakery products market is very tight, so no one can move ahead on their own. The entire market has to move in concert. In this respect, things are not so straightforward," Mere told ERR.
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Editor: Andrew Whyte, Mirjam Mäekivi
