Is there a need to raise the price for bread?

Over the past several week in Azerbaijan have been incr5eased the price electricity (57%) and by gas (twice). Most of the shops in which bread and bakery products are baked work on energy sources. In this case, the question arises: is there a need to increase the price for bread? The society in which «Bread is the head of everything" is interested in this question. For information, in mid-2016, the price for bread rose on average by 25% from 40 kopecks to 50 kopecks.  Experts believe that in this case the rise in price for bread can take place in the following cases: if there is a growth of prices for grain, flour, or energy. Let's see if there are objective reasons for the increase of prices for flour and bakery products?

Grain reserves of Azerbaijan

 According to statements by officials, currently in the country have enough grain reserves. Thus, according to Ilham Guliyev, Deputy Minister of Agriculture, in 2016, Azerbaijan produced 2.820.000 tons of grain, which is 2% more than in 2015. "At the same time, in 2016 wheat reserves totaled 1.844.000 tons (up 10%)," he said.

According to State Customs Committee, in 2016 import of grain, particularly wheat, increased by 1.6 million tons. According to official data, Azerbaijan population's need for wheat is 1.7 million tons; but if the country produced about 3 million tons of grain, if there is a need to purchase it abroad? What percentage of the countries needs covers local production? What is the quality of local wheat?

"We can meet the needs of 70%"

Currently, 70% of the country's demand in grain is provided by domestic production. If we consider the growth of grain production in 2016, it can be argued that this percentage is relatively higher than in 2015, said the Head of the Department of Plant Agriculture Ministry Imran Jumshudov. He noted that the forecast for grain production was completely justified. "In 2016, about 962,000 hectares were planted with wheat Prior to 1 August were collected more than 2.8 million tons of grain. If in 2015 the sown are totaled  ​​540,000 hectares, and in 2016 the sown area was increased to 586.000 hectares. Harvest of wheat was fulfilled by on 98.4%. In 2015 was collected 1.7 million tons of wheat. In 2016, the wheat production was 1.8 million tons, which is by 100,000 tones more than the previous year. According to the statement of the head of department, only 30% of the country's demand is met by imports. And how much grain is imported into the country?

Dependence on imports

Experts point out that the volume of grain imports to the country, 1.6 million tons, shows that the policy of food security in Azerbaijan is regrettable. It can be said that since independence, the country is by 100% dependent on wheat imports. Food wheat is almost not produced. Strategic reserves also by 100% depend on imports. However, the Ministry of Agriculture stated that grain production is more than 2 million tons per year.  Multimillion subsidies have been allocated for the production of grain. If the country really produces grain, the price of flour, bread and bakery products should be lower.

According to statistics, in Azerbaijan demand for bakery products is 140 kg per person a year. That is, to meet the needs in bread of the nine million of population requires 900.000 tons of grain. However, it is not a secret that the population of Azerbaijan reduced because of emigration. Independent studies show that since the beginning of the 90s approximately 2.5-3.5 million people left the country, and in the country really live  7 million people, the demand was should be no more than 700.000  tons of grain. So, we need to import not 1.6 million, but 700.000 tons of grain.

Wheat used by large industrial enterprises as raw material...

It turns out that the major flour producers use both local and imported wheat. For example, Ltd. "Carmen" prefers wheat imported from Russia. "We buy local wheat, but we more use the wheat imported from Russia, » answered the enterprise to our inquiry. To the question: "What percentage of  the  wheat used within a year  is the local  production  raw materials?" the company  only said : "We  work mainly with  wheat from Russia." And the "Khırman" company («Barn") did not want to answer questions, saying only that prefer exclusively high-quality wheat.

 What does the State Grain Fund say?

The State Grain Fund buys grain from local producers at the price of 250 manats per one ton. However, grain quality indicators should be within the required norms. So, wheat that meets quality indicators for grain delivered to the State Grain Reserves Fund  by  specific application №1 to the "Rules of conservation and use of the State Grain Fund" approved by the Cabinet of Ministers №105 dated July 7, 2009 is bought.

Indicators of wheat grown mostly in the saline areas of Azerbaijan do not meet the standards. Experts say that the observe salinity of almost 500.000 hectares. Therefore, mostly imported wheat is preferred. After the launch of the first grain elevator in 2010 from local farmers were bought only 1.000 tons of the third class food grain. Subsequently grain fund replenished through imports.

 Azerbaijan has no elevator to store 3 million tons of grain

The expert on agriculture Vahid Maharramov says that the figures for the production of grain are overblown: "Report of the State Customs Committee on import of grain corresponds to reality. However indices of the Ministry of Agriculture for the production of grain greatly inflated However, with grain production the production of meat and milk should also grow."

According to the committee, during a year is produced 1.2 million tons of bread. Vahid Maharramov said that for bread production approximately 900.000 tons of wheat is enough.

"Mills mainly use imported wheat. Farmers do not allow differentiating the wheat in terms of quality, because they have to buy it a low price. If the ministry states that about 3 million tons of grain is produced, let him show warehouses where grain is stored.  Azerbaijan does not have such volume storages. In the world practice, the production of grain and brown rice per capita is 300 kilo per year, of which more than 90 kilo is necessary for wheat. The requirements of food wheat and fodder for livestock should be covered by domestic production," the expert added.

He also believes that the volume of imported products suggests that demand is met through imports: "Last year, Azerbaijan imported over 1.6 million tons of wheat. This gives grounds to say that the country's demand for food wheat is fully covered by import.  I believe that in the country over a year is produced approximately 1.200.000 – 1.300.000 tons of grain. "

Inflated figures for grain production...

V.Maharramov says that according to the Ministry of Agriculture, in 2016, the country produced 3.065.000 tons of grain, including 1.84 million tons of wheat. The volume of this product, along with the meeting the country's needs in cereals, had to completely cover the population's demand for bread, meat, milk, eggs: "However, the needs of the population in bread and bakery products by 100% is achieved at the expense of imported wheat. To meet the population demand in meat by 38%, milk - by 55% and eggs 50% is provided by domestic production. Note the volume of grain products, imported into the country in 2015: wheat and meslin (a mixture of wheat and rye. the proportion of two to one) - 1.3 million tons, rye -22.000 tons, barley -53.000 898 tons of oats, 378.000 tons of buckwheat, millet and other grains -... 3.216 tons of rice – 26. 638 tons, corn - 181.652 tons of wheat flour and wheat-rye flour – 5.788 tons of flour of other cereals – 2. 260 tons of cereals and pellets of other grains – 4.852 tons of grain germs, and other grains – 6.940 tons etc ... These indicators give full grounds to assert that the production of grain in the country is in a very poor condition. "

According to V. Maharramov, last year were imported 1.6 million tons of grain, while for the production of bread, the basic in the nutrition of the population, were provided 1.2-1.3 million tons of wheat. “The government officials again have called fabricated, fictional figures for grain production. Allegedly, in 2016 Azerbaijan produced 1.844.000 tons of grain and imported 1.6 million tons. In this case, the question arises, why does the country produces grain, including wheat, and what for is it used? It would be nice if they announced how many tons of 1, 2, 3 classes wheat were produced, and some processing companies had used this product for grinding? Let those who are responsible for this area, explain: if such amount of grain is used to feed livestock, then why cannot the country meet their needs in milk, eggs, meat?” said V.Maharramov.

In 2016 the state budget allocated 597 million manats subsidies to agriculture. Most of the funds were directed to the development of grain growing. However, grain imports does not reduce, but grows. Although on the global market the price for grain has fallen, some flour manufacturers believe that a more advantageous from a commercial point of view to work with imported grain.

From the above it can be concluded that the grain in the country is produced in sufficient volumes, and imported from other countries. The current grain prices do not give reason to raise the price of bread and other flour products.

The further fate of the grain imported into the country...

Although it is not directly related to the subject, one of the major issues is associated with the further destiny of grain imported into the country.  The grain volume delivered to the country in an excess volume. It must be taken into account that large subsidies are allocated for the purchase of grain from the state budget. Studies have shown that a significant proportion of the allocated subsidies are misappropriated. By not approved data, either grain is imported into a country not in the officially indicated amount, or a certain part of the imported grain is sold to the neighboring countries at a higher price. Azerbaijan is used in the grain business, as they say, as a "transit country". That is, the subsidies allocated from the budget are written off by the "registry".

The results of these studies show that in the country are monopolized the grain import and flour production. The oligarchs have already captured a large part of the production of grain. If at this stage, the rise in prices will happen, it is, first of all, advantageous to the Government, which presents the oligarchs supervising the production and import of grain, bread subsidies. The increase in grain prices is consistent with the political leadership.

As far as the price of bread depend on the energy?

Can rising energy prices cause a rise in price of bread? Let's try to answer the question with a small concrete investigation and evidence. We visited several bakery shops and tried to find out how much energy is used at present for baking one loaf of bread. Entrepreneur Asad having a baking workshop said that one bag of 50 kg flour bakes 150 loaves of bread. Bread is baked in tandir and uses gas. Bread in the form of pellets weighs 550 grams, and the baked bread 430-450 grams. One loaf of bread is sold at 50 kopecks.

Let's see how much income the entrepreneur receives from the baking bread from one bag of flour. The sale of 150 loaves of bread at 50 kopecks brings 75 manat. Subtract the cost of:

The price for flour bag – 25 AZN

Fee for baking bread - 20 AZN

The cost of gas used - 1 manat (20 gepik multiplied by 5 cubic meters of gas = 1 AZN)

The cost of wood (for heating tandir) - 1 manat

The salt and yeast -1manat

Total - 48 AZN

 Thus the owner of the bakery receives 27 AZN income (AZN 75 - 48 = 27 AZN.) We see that among his expenses the cost of gas is very low. Even if gas price rises twice, the baking of bread from one bag of flour will cost him 2 manat. And the cost of gas used for baking one loaf of bread, will be 0, 66 kopecks (1AZN: 150 loaves = 0.66 gepik.)

Footnote. According to estimates of the German specialists,   for 1 kilowatt / hours of electricity, it is possible to perform the following work:

At home:

Use the washing machine once,

To iron 15 shirts,

Bulb 60 watts can light for 17 hours,

 For 60 minutes can be operated average power vacuum cleaner

 For 90 hours can burn saving bulb (11 watts)

In the kitchen:

300-liter refrigerator can be operated for two days,

 You can bake one cake,

 You can prepare a meal for four people in the electric oven,

Prepare 70 cups of coffee,

To fry on the toaster 133 slices of bread,

On 1 kilowatt / hours of electricity:

Use hairdryer for 60,

Watch TV for seven hours.

2500 men (the entire male population of a large village) may shave

Depending on the use of electrical appliances, these amounts may differ slightly (http: //www.verivox.de/themen/1-kilowattstunde/).

What is the cost of bread?

Let’s consider the price of bread from a different point of view: if the Grain Fund buys from farmers one ton of wheat for 250 manat, it means that 100 kg of wheat worth 25 manats.  From 100 kg of wheat at the mill is received 70 kg flour. That is,  in reality the bag of flour  is bought at  AZN 25, then 1 kg of flour costs 36 kopecks (25 x 100/70 = 36). Consequently, the cost of a 500 grams loaf of bread is 18 kopecks. As you can see, there is a significant difference in price. That is, those who today import wheat to produce flour from it, monopolizing this sector and earn much more.

If to buy one ton of wheat from farmers at 250 manat, and bake bread, the flour and flour products will cost much cheaper. Because from one kilo flour cost 36 kopecks they bake two loaves of bread. That is, the cost of bread is 18 kopecks. If we add a fee for the work, for energy for baking one loaf of bread, and other incidental expenses, even for transportation of bread, the price of one loaf of bread will be in the range 25-30 kopecks. That is, the cost of bread weighing 0.5 kg, baked from the flour produced at the mill from wheat, purchased from a farmer, together with all expenses, costs for delivery to the buyer at current prices amounts to 30 gepik, and in retail sale - 50 gepik. It should also be noted that, according to official figures, the price for   the Russian grain this year remains stable - $185 per ton CIF Baku, as in 2016.

That is, if the bread rises in price, the reason for this must be sought not in the growth of energy prices, but in the wheat monopolies.

Sabir Veliyev, the Head of Department of the Ministry of Agriculture said that despite the fact that Azerbaijan is dependent on grain imports, it has been delivered to the country in sufficient volumes: "So, it comes out that one kilogram of grain costs 16 gepik. The cost price of bread is approximately 25 gepik, and it can be sold for 30 gepik, and 5 gepik income is quite enough them. "

On the other hand, a bag of 50 kg flour is sold for 25 manats. If the average weight of one loaf of bread is 500 grams, then from one bag of flour can be baked 100 loaves of bread. The price for one loaf of bread is 25 gepik. It should be noted that all companies engaged in the production of flour sell it at the price exceeding the cost price. Despite this, the bread baked from imported flour which is currently in the retail sale, is also sold to customers at the price exceeding the cost price.

If there is abundance of bread...

In fact, developing the grain Azerbaijan, on the one hand, it is possible to solve the problem of the grain in the country, and there will be no need to import grain from abroad. On the other hand, farmers can easily sell their products, make a profit and be more interested in this job. And most importantly - in the country will be an abundance of cheap bread. And plenty of grain means improvement of the food security of the country and strengthening its defense capability. As said Samad Vurgun: "If there is bread abundance the homeland is invincible."

To solve the grain problem in the country, first of all, it is necessary to eliminate the monopoly in this area. It is necessary to effectively use the allocated subsidies, improve soil fertility, eliminate soil salinity, and take other necessary steps for the production of high-quality wheat. For the production of grain farmers have to be provided with preferential loans, equipment, provide assistance to bring to market and sell these products at affordable prices.