Tuesday, September 29, 2020

Bread prices on the rise

A global increase on the price of wheat has hit hard on local millers and forced them to increase the price of bread. Schalk Smith of Bolux Milling told The Sunday Standard on Friday that the price of wheat has increased by over 100% in the last year. He also said that the price of bread is compounded by the fact that the price of all the other additives that are used in making bread, like soya, sugar, oil, fats and even fuel have escalated, therefore, contributing to the overall increase in the price of bread.

Information reaching The Sunday Standard indicates that local milling companies, Bolux Milling and Bokomo, both increased the price of bread flour between the 10th and 14th of April.

Wheat prices have, over the last few months, risen from an average R1900 per tonne to over R 4300 presently. Millers who have for some time been trying to cushion against price increase are now being forced to pass on the expense to the customer if they are to remain sustainable, such that bread price increases are imminent in Botswana.

However, Schalk Smith was quick to point out that despite the recent increases in the price of wheat and all the other additives needed to bake bread Botswana has experienced very limited price increases and local bread prices remain very low as compared to countries like Australia, United Kingdom and even South Africa, despite the fact that all of the wheat in Botswana is imported.

Smith also pointed out that the bread business in Botswana has very small margins of an average of 15thebe to 19thebe per loaf such that it is imperative to push volumes to realize profits. He also said that all of the additives used in baking bread are imported from South Africa and, therefore, become expensive when the Rand weakens, such that local bread producers always operate in precarious business environments.

The increase in the global price of wheat is a result of a number of factors among them drought and severe weather in wheat producing countries like Canada and Australia. Climatic and environmental changes like falling water tables and crop withering temperatures have over the years greatly offset the advances made in agricultural research and investment. Business Day quotes World Bank President, Robert Zoellick, as calling for a new deal on global food policy that will not only focus on hunger and malnutrition but also on the interconnections with energy, yields, climate change and others.

There has also been a boom in demand from fast developing countries like China and India. Already, there are fears of hunger, malnutrition and social unrest in the globe as bread and energy prices reach record highs while international stockpiles reach all time lows.

In Southern Africa alone, food prices are expected to maintain their upward trend and put pressure on disposable income as, together with petrol and energy price hikes and escalating interest rates, they exert a cumulative effect on income.

The food price increases have been attributed to the increase in the production of bio fuels in Brazil and the United States. Because of the bio fuel craze and the incentives given by the U.S governments to farmers who produce feedstock for bio fuels, most farmers have shifted focus from producing wheat to producing maize to supply the bio fuels industry greatly reducing the world’s supply of wheat.

At the same time, farmers nowadays find it lucrative and profitable to produce grain for feedlots in meat production facilities, which are aimed at satisfying the increased demand for protein in fast developing economies like China and India. Generally, people are moving from staple food to protein food such that more grain is nowadays being produced to feed animals rather than for human consumption as was the case before.

South Africa, which is Africa’s third largest producer of wheat and Botswana’s main supplier, producing around 2 million tones and importing a further 2 million, has also experienced a gradual decline in production levels over the years. Wheat constitutes around 25% of the cost of bread such that any increase in the price of wheat or decrease in its supply will directly result in an increase in the price of bread. In South Africa, the price of a loaf of bread is around R 10.

However it has emerged that it is not possible to augment supply shortages from South Africa by establishing wheat farms in Botswana as the local climate is not conducive for wheat production, which needs specific weather conditions to flourish.

Amid fears that bread producers might opt for unsavory profit making activities like making light weight loaves, Smith called on consumers to become more oriented towards quality.
“Consumers should now strive to discern quality and buy value added (maxy) bread that, though a bit expensive, is perfectly packaged, reseal-able, of greater quality, and has a longer shelf life so as to offset the effects of the price increase,” he said.

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The Telegraph September 30

Digital edition of The Telegraph, September 30, 2020.