Bread price increase inevitable

Gardenia Bakeries Philippines Inc. said retail prices of premium bread will increase by P4 per loaf as soon as flour millers raise the cost of locally-milled flour following the surge in wheat prices in the world market.

Gardenia vice president Nestor Constancia said the price hike would be inevitable as wheat prices started to go up in the global market.

“We’re told that the price increase may be enforced by waves to temper the increase and allow customers to also adjust to the new price. Bad harvest in the US due to persistent drought pushed up wheat import price,” he said.

Pilmico Foods Corp. president Sabin Aboitiz said wheat prices surged by as much as 50 percent in the world market because of tight production in major producing areas, including the US and European countries.

The Philippines imports about 95.2 percent of wheat from the US. There are 20 flour millers in the country, who are members of  the Philippine Association of Flour Millers Inc., the Chamber of Philippine Flour Mills or independent flour millers.

Constancia said even alternative sources of wheat like Australia and Canada were also having a bad wheat harvest.

A 25-kilogram bag of hard flour currently costs around P700. With the proposed increase, an additional P50 per bag may be imposed under the first wave.

Constancia, who is also the president of the Philippine Bakers Association, said the price increase could be implemented in three waves and could reach a total increment of P150 to P200 per bag of flour.

“Not only breads are affected by the increase in flour prices. Soft flour which is used for pastries, noodles and pasta are also bound to increase prices,” he said.

Flour milers are supposed to reflect the new cost of flour in the immediate months of the second semester, he said.

US wheat commodity futures started going up in May this year and peaked at $8.12 per bushel on July 3, up by $2.72 per bushel from the May 15 level of $5.40 per bushel, or an increase of 50.4 percent. Prices have since hovered around $8.50 to $7.50 per bushel level.

Local millers said the flour price adjustments would vary per mill as each needed to consider how well or poorly they covered their requirements for the coming months. 

Since prices started going up in May, the higher priced wheat bought at that time have now been milled into flour and will have to be sold at correspondingly higher price levels.

The local flour market grew 4.6 percent in 2016, fueled by a strong economy and higher purchasing power of consumers.

The Philippines imported 2.6 million metric tons of wheat in 2017, or 4 percent higher than 2015’s importation of 2.5 million tons.

Flour consumption, including imports, reached 84.6 million bags of 25 kilos each, up by 4.6 percent from the previous year’s consumption.

Topics: Gardenia Bakeries Philippines Inc. , Bread price increase , Wheat prices , World market
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