Sri Lanka’s bakers call for price controls on wheat flour after hurting egg farmers
ECONOMYNEXT – A grouping of bakers in Sri Lanka has called for price controls on wheat flour after setting the Consumer Affairs Authority on egg farmers, disrupting the sector which was hit by high poultry feed prices and worsening the risk of selling layer chicks for meat.
Sri Lanka’s wheat prices shot up amid forex shortages which hit wheat milling firms, and a ban on wheat flour exports by India amid a global rise in wheat due to Federal Reserve money printing and disruptions of Ukraine wheat exports as well as controls on open account imports.
The rupee also fell from 200 to 360 to the US dollar after the central bank printed money for two years to boot growth (output gap targeting).
Price Signals
Namal Perera, President, Southern Province Small and Medium Bakers Association told reporters, the main importers are still giving wheat at 283 rupees a kilogram.
“In the recent past the price of a kilo gram of wheat flour fluctuated around 425 to 450 rupees,” Perera said.
“It is said that the wholesale price of wheat flour is 297 rupees a kilogram in the Pettah market. But when it goes to the provinces it is 360 to 375 rupees. There all kinds of prices in the market.
“I have heard that the friends of some bakery association had imported wheat flour from Turkey. There is an opinion that it can be given for 325 rupees.”
Perera did not explain why he could not buy from the main suppliers at 283 rupees a kilogram.
However the wholesale traders say the main suppliers do not have enough stocks at the price and are issuing limited volumes from stocks bought earlier. Some also have suppliers credit on wheat bought when the rupee was around 200 to the US dollar.
Importers confirm that Turkey is the cheapest source of wheat flour at the moment. However it is not easy to get wheat flour from Turkey which is milling Ukraine and Russian wheat.
Instead wheat is bought from Dubai or Oman, which are more expensive. Some wheat flour grades are also more expensive.
“Turkish wheat again went up when Russia made a missile attack on Kiev and other cities,” an importer said.
When domestic prices shot up to 400 rupees, importers also bought higher grade finer wheat flour such as those used to make cake, which were available but at a higher price.
That is how price signals are expected to work, with high prices brining it supplies at different levels.
Meanwhile the bakers association is calling for price controls on wheat to bring down their bread prices.
Unlike the wheat flour market where there are different prices, bakery associations engage in collusive pricing announcing price hikes by at press conferences regardless of their actual costs.
No action has been taken against associations for collusive behaviour.
Meanwhile the bakers have not asked for price controls on their products.
Straight Face
“If a fixed price can be set for wheat flour for price and quality, we can also reduce the price of bread by an amount,” Perera said with a straight face.
Bakers previously set the main price control agency, the Consumer Affairs Authority on egg farmers calling for price controls on eggs.
Poultry farmers had been badly hit by rises in maize prices due to a harvest failure, import restrictions and also a ban on open account imports.
The CAA has history of acting against the poultry sector with price control. The sector had been battered by import restrictions and protectionism on maize for years.
There is a politically powerful collector lobby (generally called the maize mafia) that push for protectionism and domestic production of high priced maize. (Colombo/Oct16/2022)
