Wheat Price Will Stay Stable Till Spring
16 February, 2012
Wheat Price Will Stay Stable Till Spring

The recent news that Russia plans to impose restriction on its wheat export by spring pegged up the flour price hike apprehensions in Georgia. However, experts believe no price hike looms in prospect till spring.  

Flour has already increased in price by GEL1-2 early this month from GEL 31 per a 50 kilo sack of flour to GEL 32-33 however wheat exporters and bakeries do not forecast further price hike till the prognosis on corn harvest are made by spring.

 They do not disclose reasons why the price increased so far.

“Prices did not change at all and are not supposed to increase in near future,” Davit Galegashvili, Head of the Association of Georgian Wheat Importers said in the interview with Georgian Journal. “We do not import wheat from Ukraine at the moment and refer to Russian import very seldom: it makes perhaps 10-15% of our supply. Our bulk supplier is Kazakhstan making about 60-70% of our supply, and it costs USD 335 per ton including transportation to Gardabani [Tbilisi adjacent region]. 10-15% is our local production and about 10-15% Russian import that we refer to very seldom.”

According to him, the harvest was good past year and forecast for this year can be made only by spring when crops will be sawn. Otherwise, the underway crazy winter globe over makes him optimistic that harvest can be good for frosts and snow is good for harvest.

“This is no price hike in fact, flour gained just GEL 1, it is not an alarming price change and we do not plan to increase bread prices,” Nugzar Kvinetidze, Head of Alali 94 bakery, explains. “I cannot say why the flour price went higher by GEL 1 but that is not a significant change to affect bread price, if it increased by GEL 3 it might affect bread prices, but I do not expect any change in price till spring.”

Irakli Lekvinadze, an economic analyst, thinks the recent increase in price can be explained by apprehensions that Russia plans to impose restrictions on its wheat export. Although Georgia diversified its wheat supply and no longer depends on Russian wheat by 80% as before, restrictions on Russian export that is one of the biggest players at the international corn market can jack prices up. To regulate its export within 25 million tons Russia has been planning to tax its export by Value Added Tax (VAT) starting past year and now made up its mind to adopt the VAT starting April of 2012, Reuters informed on February 1st, 2012 based on comments of Ilya Shestakov, Deputy Agriculture Minister of Russia. According to him, the final decision will be drawn after the export figures of February will be clear.

Lekvinadze presumes that although Georgia no longer depends on bulk Russian wheat import taxing Russian export by VAT will affect prices in Georgia in this way or other.

“Russia is one of the biggest market players and VAT will restrict Russian export that will affect international market prices and this indirectly will be reflected on Georgia, since prices go in all wheat exporting countries and any imported corn will get more expensive. However more precise data will be known by end of this February when harvest prognosis will be made. The recent change in prices can be explained by presumptions that reserves are expiring in Georgia,” he elaborated.

Georgian statistics service has not the latest data of wheat reserves of Georgia as the data of 2011 will be reported by June of 2012.

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GEL Exchange Rate
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GEL Exchange
USD
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USD
2.7468
EUR
1
EUR
3.0943
GBP
1
GBP
3.4753
RUB
100
RUB
4.2700
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