Wheat or Chicken?

Wheat or Chicken?

Wheat or Chicken?

The FINANCIAL -- In August 2018, the average cost of cooking one standard Imeretian khachapuri increased to 3.43 GEL, which is 3.8 % higher month-on-month (m/m, that is, compared to July 2018), but 0.5% lower year-on-year (y/y, compared to August 2017).

According to Khachapuri Index data, the price of wheat flour in different bazaars in Georgia has started to go up. The price of wheat rose by 1.6% in August month-on-month (compared to July 2018).

This increase follows a similar increase in the international market for this commodity. According to the FAO Food Price Index, the price of wheat has gone up by 8% month-on-month. High global prices of wheat this year have been attributed to a low supply in the world market. This will eventually be reflected in domestic wheat prices in Georgia, where the self-sufficient ratio for wheat is 15% and the country heavily depends on wheat imports.

Almost 100% of wheat imports come from Russia. It is expected that higher wheat prices in the world market will be transmitted to Georgia in the coming months, leading to further increases in the price of wheat and wheat products. According to ISET’s policy paper “Price Transmission on the Wheat Flour Market in Georgia,” it takes around 6 months for international wheat prices to be transmitted fully into the domestic market.

Furthermore, wheat prices may be affected by an upcoming new regulation. Namely, importing wheat via roads will be banned. According to this new regulation, wheat can be transported to Georgia only by sea or train. While some stakeholders argue that this will increase efficiency in wheat transportation and will thus lower wheat prices, others warn that there will be an increased burden on currently-operating small wheat traders, and expect a slight increase in the price of wheat and wheat products, Moreover, representatives of not only wheat, but other potentially affected sectors (e.g., chicken, eggs), are protesting this regulation. Several agricultural producers are against this regulation, warning that this will lead not only to wheat price increases, but will raise the prices for many other related products. The Finance Minister announced that the decision to ban the import of wheat via roads has been postponed till October 1, 2019.