Forget oil, wheat gives new warnings
Consumer goods companies have indicated hikes in their products to adjust the higher import prices of wheat alongside a further rise in freight costs owing to fuel price hike
As wheat prices have shot to a 14-year high in the span of a week, the cost of flour and everyday food items, especially bakery items made of flour, has already marked a rise in the retail market.
The rising wheat price, which shot up by Tk120 per maund (37.32kg) in Bangladesh's wholesale market, has started to feed into prices of flour and semolina amid supply fears sparked by the weeklong Russia-Ukraine conflict.
Now, a packet of flour weighing two kilograms costs Tk120 from Tk90 a week ago, while the price of a packet of sliced bread has already gone up by at least Tk10 at some branded bakery outlets and retail shops.
If prices of bread and biscuits – sold at wayside tea-stalls – go up, snacks of working people will cost more.
Consumer goods companies have indicated hikes in their products to adjust the higher import prices of wheat alongside a further rise in freight costs owing to fuel price hike.
The hike of global wheat price is higher than that of fuel, and food price hike impacts consumers directly.
Good harvests have helped Bangladesh meet its rice demand for local supplies. Yet, rice prices have been higher and imports are needed to keep supply stable.
Rising fuel price and possible hike in fertiliser price owing to war-induced supply disruption will add to rice farming cost in future.
Although wheat is not a staple food here, its demand has been on the rise due to the spectacular growth of fast-food shops and the bakery industry.
Wheat production has remained almost stagnant at a range of 10-11 lakh tonnes a year, while demand was 54 lakh tonnes last year, with four-fifths being met by imports.
About 38% of Bangladesh's wheat came from Russia and Ukraine - the global breadbasket now at war. Though wheat import from India has been on the rise, it is far from replacing the two major sources.
So, supply uncertainty looms large and it is mirrored in the global market price of wheat, which surged more than 40% since the Ukraine crisis broke up to cross $12 per bushel (27.21kg), meaning Tk49 per kg.
Bangladesh, the world's fifth largest importer of wheat, has a demand for 58 lakh tonnes of the staple and it meets 60% of its wheat needs through imports from Russia and Ukraine, according to the food ministry.
As of 1 March, this year, wheat imports stood at over 37 tonnes. The country imported around 9.50 lakh tonnes of the foodgrain from the breadbaskets in the last two months. Last year the imports from the two countries were 35 lakh tonnes.
As per the demand, around 30 more lakh tonnes are needed to be imported for the current year, sources at the ministry noted.
But the ongoing war has closed major ports in Ukraine and snapped logistics and shipping links, causing shipments to remain stalled. Besides, trade with Russia has also dried up because of sanctions imposed on the country and soaring freight costs.
Against this backdrop, Bangladeshi grain importers are looking for alternative sourcing countries
Tariq Ahmed, director (operations and marketing) at TK Group, told The Business Standard, "The wheat import from Ukraine and Russia has remained stopped for the last two weeks. Alternatively, we had to book wheat from Canada and Argentina for a 25% higher price, although the quality is not good."
Before Russia's invasion of Ukraine, they booked the foodgrain at $390 per tonne and it surged to $446 per tonne, he said.
Md Taslim Shahriar, assistant general manager (accounts) at Meghna Group, said the cost of wheat import from India was $320 a tonne and it now increased to $400.
As the price is increasing everyday, there is no substitute for raising the price in the local market to adjust it, he added.
Getting less supplies from Russia and Ukraine means additional demand pressures on other markets, such as India, Canada and USA, which may not be able to feed the whole world at a time, he pointed out.
On the other hand, China, which used to import corn for its feed industry, is moving to secure wheat supplies instead, helping push prices even higher.
Ukraine's wheat and corn exports meet 40% demand of the Middle East or Africa, and any disruptions to this supply will put added pressures on other potential sources of wheat and impact the price further.
Redwanur Rahman, general manager at Bashundhara Food and Beverage Ltd, said, "As the war cut off exports from Ukraine and Russia, all are flocking elsewhere. But not everyone will get it.
Everyone may have money, but not everyone will get wheat. If the price goes up all the more, many will reduce its import, he also said.
"If the crisis stays for a long time, those who depend on bread could go back to rice. That is why we have to keep our rice production stable," he added.
Biswajit Saha, executive director (Corporate Affairs) at City Group, said there is a risk of further increase in booking prices of wheat due to its shortage in the international market. Because other supplier countries cannot increase production all of a sudden.
Prices of other consumer goods go up too
Prices of all other food products have risen by 40% in the last two weeks.
In Khatunganj, the country's largest wholesale market for consumer goods based in Chattogram, soybean oil and palm oil have reached records. Palm oil is being sold at Tk5,800 per maund (40.9 litres) and soybean at Tk7,000 per maund.
In just ten days, the price of sugar has gone up by Tk85 to Tk2,725 a maund, while lentils saw its prices increase by up to Tk190 to Tk3,358 a maund in the market
In these ten days, the price of mustard imported from Ukraine has increased by Tk 2,650 and is being sold at Tk 3,630.
Azizul Haque, owner of Haque Trading in Khatunganj, said prices of various commodities started rising owing to lower supply and higher imports caused by the Russia-Ukraine conflict.
Kamruzzaman Kamal, director at Pran-RFL Group, said not only wheat but also oil and sugar prices are rising. All three ingredients are needed to make a biscuit. These account for 80% of costs for making a biscuit. So, a hike in prices of the ingredients will feed into production cost of a food product.
All in all, the costs of the three ingredients have increased by 25-30%, he also said, adding, in this case, there is no way but to increase the price.
Uncertainty over government imports
This year the government has imported 4 lakh tonnes of wheat against the target of 5 lakh tonnes. But uncertainty has now been created over the sourcing of the remaining amount.
Md Shakhawat Hossain, director general of food, said, "Everyone goes for stockpiling of food during a crisis. Many countries are doing so because of the Russia-Ukraine war. As a result, a crisis has been created."
"We are preparing to import 2 lakh tonnes more. Of the amount, we have finalised the import of 50,000 tonnes from India. But the source of the rest is still not known," he added.
Dr Mosammat Nazmanara Khanum, secretary to the food ministry, said, "We usually get wheat at a lower price in Russia and Ukraine than in the US, Canada and Australia. As the shipments from the world's most vital breadbaskets have been stalled, prices will naturally go up.
"But the new market for us is India. We have already talked to India. We also have an agreement with Bulgaria. Wheat can be obtained from there at a relatively low price," she added.
Mohsin Bhuiyan and Tarif Tahmeed Khan also contributed to this report's analysis
