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Ukraine's bread making: Bakers increase prices of bread by 10-15%

Author : Olena Holubyeva

10:02, 24 February 2017
Ukraine's bread making: Bakers increase prices of bread by 10-15%

Author : Olena Holubyeva

Despite the record crop of wheat, this is not the last price increase

10:02, 24 February 2017

Read the original text at 112.ua.

 

112 Agency

Why the prices have risen?

At the end of January, the price of a loaf of bread jumped up in the Kyiv supermarkets. The retailers explained that after 20 January the major suppliers (like "Kyivkhlib") raised the price of mass varieties of wheat. In the beginning, the selling price in "Eco-Market" was 5.34 UAH for the loaf of bread, and now it is a 6.12 UAH, "Ukrainian bread" went up from 7.92 UAH to 9.12 UAH.

There are some types of bread, regulated by the state, the markup amounts to 10%.

Unofficially, retail chains report that they have addresses to the producers and asked not to raise the prices. But they refused, citing the economic factors. "As a result, the network appeared in a situation when they were forced either to accept the conditions of bakers, or stay with empty bread shelves," said representatives of one of the networks.

Related: Which regions are breadwinning in Ukraine?

It is noteworthy that the largest producer of bread in the capital, "Kyivkhlib" in all previous years, have been announced the price change. The company just issued a press release, held a press conference at which explained the reasons for price rise. This time, not a single word was said about it on the official website. The company reluctantly commented on the situation. The company is considering relative bread’s price increase if the price for the components grows. "Kyivkhlib" representative Volodymyr Chereda, he said that since January 20, the enterprise has raised the price of mass varieties and of the entire group of bakery products by 10-15%.

Related: Ukraine shall have a record-breaking wheat harvest – USDA

He stressed that the producer price remained unchanged throughout 2016. The previous increase took place in December 2015. 150 branded kiosks would follow the terms of the investment contract; and the price of bread will not change until the end of December 2017.

Back in late January, the owner of Khlibni investytsiyi company, second largest supplier of bread in Kyiv, Yuri Tryndyuk told us that his company raises the price of bread in Kyiv by 15%, and by 7-8% for the regions. According to him, in Kiev, the most significant increase was due to the fact that over the last year, as opposed to regions, prices are not increased.

The main reasons for the current price hike is an increase in energy prices and the increase in the minimum wage up to 3.2 thousand UAH (since January 1), as well as the increase in the price of flour, which takes about 38% of the cost of bread.. Only in December-January, the price of rye flour rose by 21%, of wheat - by 15%. In December 2015 – December 2016 the price of gas increased by 21%, electricity - by 29%. For the last month, gas prices rose by 2 thousand UAH per 1 thousand cubic meters, and gas accounts for about 5% of the cost of bread, Tryndyuk said.

Related: Kievans leave pending bread in stores for pensioners

The general director of association "Ukrhlibprom" Olexander Vasylchenko says that the trend of "creeping" increase in grain and flour prices, as well as cautious increases in bread prices, is observed throughout Ukraine.

Despite the record crop of wheat, this is not the last price increase

It is noteworthy that the price increase occurs despite the fact that the country collected a record grain harvest. According to the State Statistics Service, in 2016 the production of grain and leguminous crops in the amended weight was 66 million tons, which is the highest number for all the years of Ukraine's independence. 26 million tons of wheat were harvested, this is 0.5 million tons less than last year, rye - 391.5 thousand tons, which is 0.5 thousand tons more.

Transient stocks of grain in the current year are also high and are about 5-7 million tons of grain across the group, said the general director of "Ukrainian club of agrarian business" (UCAB) Taras Vysotsky.

Related: Ukraine is largest exporter of wheat to EU in 2015/16

According to UCAB, the yield is slightly lower than official statistics - about 64 million tons, however, Ukraine has provided all kinds of grain and no shortage of any of the species, Vysotsky said.

He also points to the world low purchase prices, which due to the prosperous situation of high yield remain at the level of $ 150-170 per ton (against US $ 250-270 in previous periods, when demand was high due to the high demand in the world). "But taking into account the factor of devaluation, even at these prices, it is profitably to work. At such prices the profitability of farmers is about 25%," noted Vysotsky.

Related: SIPRI: Ukraine increases sales of military products to Russia in 2016

But if the devaluation plays into the hands of the farmers, the financial position of the millers and bakers in the case of the dollar exchange rate fluctuations can seriously falter. Therefore, they often reinsured against future shocks, including into the price the risk of future periods. "No one can in fact increase the price of bread every day," says Vasylchenko.

Related: Moldova cancels limits on importing meat and dairy products from Ukraine

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