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Bakeries are facing a significant increase in flour prices due to the rising cost of grain and predictions of a decrease in harvest. The National Union of Bakers (NUB) reported that many enterprises have received notifications of upcoming price hikes for high-quality wheat flour up to 29-30 rubles per kilogram. Over the past two weeks, flour prices have risen by several rubles per kilogram, reaching up to 30% or more compared to the beginning of the month.
Some flour mills have started demanding a reduction in payment deferral or even prepayment, and have also proposed fixing excessively high prices already for July. In light of information about unfavorable weather conditions affecting crops and the projected grain harvest, panic has arisen in the flour market. NUB stated that the situation in the domestic wheat market depends on exports, which determine high prices and restrict supply within the country.
The existence of export duties on grain, without similar ones on flour, has led to an increase in flour exports. NUB expressed concern that the lack of a quick response to the situation could lead to a critical flour shortage in the domestic market, considering the almost boundless demand from Asian and Chinese markets. The government is taking measures to restrain bread prices, so NUB proposes the temporary introduction of a customs duty on flour exports to eliminate critical price levels of the main raw material and reduce prices in the domestic market by 15-20%.
If nothing changes, NUB forecasts further deterioration of the industry's financial condition, which could lead to the closure of some bread production enterprises, especially small and medium ones, which are crucial for the regions. Although the rise in flour prices slowed by the end of June, it still remains at a very high level. This increase in raw material prices may impact bread prices.
The President of the Russian Union of Flour and Groats Enterprises, Igor Sviridenko, believes that the market situation is more stable than what bakeries claim. He asserts that although flour prices have indeed risen over the past month, they have not reached the levels claimed by NUB. He noted that in some regions, flour prices started to decrease after the rise, while in others, the increase continues but is not as significant. The price of flour accounts for about 20% of the cost of bread, so even a considerable rise in flour prices will only lead to a minor increase in the cost of bread.
Sviridenko also pointed out that the increase in flour exports helps reduce its cost in the domestic market since production capacities in Russia are excessive. In his opinion, restricting the export of milling products is economically impractical. The Ministry of Agriculture deems the current bread and flour market situation stable. The average ex-factory price of wheat flour has decreased by only 2.9% over the last year and is 10.9% cheaper than the previous year.
The grain harvest of the past season, despite exports, is sufficient to meet the domestic demand for flour. The supply of flour exceeds the demand from the baking industry, and the Ministry of Agriculture has not received information about product shortages from businesses. Flour production in Russia continues to grow. Overall, it is expected that prices will remain stable in the future.
The Chairman of the Association "Rusprodsoyuz," Dmitry Leonov, believes that the rise in flour prices is linked to the restoration of profitability for agrarians. He noted that in the two previous years, grain prices were extremely low, and the restoration to an economically viable level was expected. Leonov also considers that the rise in flour prices is limited and will not continue. Expert Denis Ternovsky points out that flour prices are at a low level, and the rise in bread prices is influenced by other factors unrelated to flour and grain. In general, with sufficient supply and grain harvest, stable demand for flour in Russia is expected.
