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Bread prices will double in fall due to rising grain prices - daily

Baltic Business Daily

RIGA, Jul 25, BNS — Latvian four producers and bakery owners predict the bread prices to double in fall, as the raw material and grain prices as well as other costs are rising, daily Latvijas Avize reports.

Valdis Circenis, the president of Latvian Bakers Association and the owner of the bakery Rogo Agro, told Latvijas Avize that the bread price could double if the flour price rise will reach 30 lats (EUR 42,68) per ton. Besides, in Estonia a loaf of wheat bread costs on average 0.20 lats more than in Latvia, which means that a loaf of bread in Estonia costs 0.50 lats, added Circenis.

The daily reports that the largest Latvia's wheat flour producer Dobeles Dzirnavnieks will pay 110-120 lats per ton and the price is by 60-75 percent higher compared to the same period of the last year. The grain processing company Kemira grain manager Janis Zugris said that the possible grain price could reach 105-125 lats per ton. He added that the trade on the real grain market will start only next week and then the corrections, including price reduction, could be made by the quality criteria and distances from the threshing venue to the storage facility.

Board chairman of Dobeles Dzirnavnieks Valdis Muiznieks answered Latvijas Avize question about the grain prices as follows: «In October, when the grain of the new crop will be used, the bread price will definitely double. Why? Because this year the grain prices in Latvia reached price level of other European countries. At present bread in Latvia costs 2.5 times less than in the EU. Workers salaries are also being adjusted. If we do not pay the people who work, there will be no one to work.»

Other experts told the daily that due to failing crops in large grain producer countries, smaller areas of grain fields and wide use of grain in the production of biofuel, the demand is increasing and the price will rise as well. Anther reason for price rise is the high export duties placed by large grain producing countries, like Kazakhstan, Ukraine and Russia. Circenis added that Dobeles Dzirnavnieks would raise flour prices on August 20th. Price for flour made from last year's grain is being raised. The flour produced in Estonian city of Tartu are becoming more expensive on September 1st. these play important role in the Latvian market as well. We cannot use regular methods of calculating bread prices as the costs of oil plants should be considered as well and the fats will become more expensive for at least by one fifth. Other ingredients, like raisins, seeds, nuts and malt are gaining prices. Conclusion of long-term contracts becomes impossible. Many small bakeries will have to leave the business due to this situation, Circenis said.

Director of economics institute of Latvian Academy of Sciences Raita Karnite told daily Latvijas Avize that «there are goods that can and that cannot be replaced. People cannot stop using food. But he food products can be replaced, for example, bread can be replaced by potatoes. Now people already eat less fish, as these are expensive. The prices may be raised if the demand permits that. Latvia has the third lowest welfare level in the EU.» The market will not allow for double price rise. Several participants will have to leave the market if this happens.

The daily adds that grain costs will affect other product prices, like meat and meat products.

In spring the industry experts predicted 10-15 percent price rise on bread.

Date:  25.07.2007

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