Bakers have increased the price of bread by up to 10% with immediate effect to absorb increased production costs arising from an 85% surge in the global price of wheat early this month, following an export ban imposed by Russia.
The world’s third largest supplier of wheat banned exports for the rest of the year, with effect from August 15, triggering speculative trading in world markets, which pushed up the cereal’s price to a two-month high of $7 per bushel.
Local millers have consequently hiked the price of flour by 20%, as they currently depend on imports to counteract production challenges. Flour constitutes about 30% of the cost of baking bread.
But the level of increase in the price of bread will differ according to the quality of the bread, with a standard loaf rising to $1,00 from around $0,90 and a premium loaf hitting $1,10.
“The price has gone up with immediate effect,” Sydwell Chitehwe, the National Bakers’ Association chairman, confirmed to NewsDay yesterday.
“Millers have increased the price of flour by 20%. Part of it we are absorbing and part of it we are passing on to consumers. We are not passing the entire cost of the price increase to consumers.”
Chitehwe added that the association took the step after consultations with the National Incomes and Pricing Commission and the Grain Millers’ Association.
National bread demand is currently estimated at about 1 million loaves a day, and is unlikely to decline because of the price hike as substitutes are even more expensive.
However, the increase complicates the unresolved issue of change, a big source of inflation, as consumers will be forced to buy bread and other unwanted goods for transactions to complete.
This discretionary spending is naturally inflationary.
Although Finance minister Tendai Biti has promised to address the issue, action is long overdue.
The price increase has come about because of Zimbabwe’s excessive import exposure, which makes the country vulnerable to price and supply shocks in global markets.
The price shock coincides with a record surge in the country’s wheat imports following an all-time slump in national production of the crop and second most consumed after maize.
The Commercial Farmers, Union, which accounts for the bulk of wheat production in the country, predicts that national output of the crop currently in the field will fall steeply to 11 000 tonnes against national demand of 250 000 tonnes.
To plug the gap, the country will have to increase the volume of wheat imports, which makes it vulnerable to future global market movements.