Price and Prejudice on Wheat Market

Price and Prejudice on Wheat Market

Price and Prejudice on Wheat Market

The FINANCIAL -- The cost of cooking one standard Imeretian khachapuri in November 2018 averaged at 3.62 GEL, which is around 0.8% higher compared to October 2018 (month-on-month), and 2.2% lower in comparison to the previous year (November 2017).

The recent increase in Georgian bread prices was one of the most hotly debated topics within the country. Several ministers even commented on this rather significant price surge. Experts relate this rise to a lower harvest from exporter countries.

According to Indexmundi, starting from March 2018, international wheat prices were characterized by an increasing trend. However, international wheat prices started declining from September 2018. According to the USDA office of Global Analysis report, over the last three months the US and Canadian prices are up, with strong international demand, while Black Sea prices have declined slightly.

End of Month Prices for Major Wheat Exporters

Source: IGC

The FAO Cereal Price Index estimates are in line with the latest price trends and the reports show decreased cereal prices in November 2018, 1.1% lower than in October. The month-on-month decline reflects continuous and fierce competition for exports amid ample supplies.

However, bread prices in Georgia do not follow the latest international trends for wheat price. According to ISET-PI’s research, it requires seven months for prices to transmit from international wheat to Georgian flour prices. As the international price of wheat was high in summer 2018, due to a decreased wheat harvest, it might only now be reflected in domestic flour prices.

It is likely that large millers have sufficient wheat stocks, and the international price fluctuations do not immediately affect domestic prices. If the international wheat markets’ prices remain low over the following months, the decreased price might be transmitted to the local market, accordingly it will then lower the price of bread in Georgia.