Is the increase in bread prices justified? The question is not rhetorical

In the second half of January 4, flour and bread producers decided to wish the Azerbaijani people a Happy New Year in a peculiar way.

The following message was  sent (unistehsali@gmail.com) on behalf of anonymous flour and bread producers:

“As you know, due to the ongoing global negative processes, uncertainty, pressure on production and supply chains, as well as because of the COVID-19 pandemic, food prices in the world have increased sharply. These processes affected the prices for food wheat.

Since the import of milling wheat to Azerbaijan is mainly from Russia, the rise in prices in the market of this country is due to the supply of this product to our country at higher prices. In addition, the introduction of a high export duty in Russia from February 2021 also seriously affects the rise in prices. The average monthly export price  per one ton of milling wheat in Russia in December 2021 compared to the same period in 2019 increased by 58.7%, and compared to December 2020 - by 33.1%.

At the same time, in order to reduce the negative impact of the global rise in prices on the Azerbaijani market, the state provided great support to importers and producers of flour during the year. So, in order to bring the stocks of food wheat in the country to the required level, starting from 2020, subsidized loans are allocated to suppliers. In addition, since February 2021, subsidies to flour producers have been paid, the import and sale of milling wheat, as well as the sale of flour and bread are exempt from VAT. As a result of the support measures that we provide to entrepreneurs, global price changes did not have a significant impact on the Azerbaijani market, which made it possible to maintain the wholesale price of a 50 kg sack of flour at the level of 26 manats.

Considering that the current subsidy mechanism is valid until the end of December 2021, now it is necessary to continue the activities of wheat importers and flour producers, to bring the price of flour in line with the current price of food wheat in order to reliably provide our country with this strategic food product. as well as preventing the threat of a deficit.

According to our calculations, as a result of adaptation, the wholesale price for a bucket of flour weighing 50 kg may rise to 36 manats, in connection with which the cost of traditional (round "factory" bread) is also likely to increase by a maximum of 0.10-0.15 manats.

Aware of our important role in providing food to our citizens, we declare that while the price of flour will be aligned with the current price of milling wheat, we will mobilize all our efforts to ensure that the prices of bread and flour products do not rise above the level we marked before harvest period 2022. We call on everyone in the food supply chain to stand in solidarity with us."

Attempts to find out the authors of this collective appeal were  futile. Therefore, I address questions to the government, which, as indicated in the appeal, regulates the "grain" policy.

The question is: Why do you mention the world prices, when  for  December 1, the gross harvest of grain and leguminous crops (including corn) in Azerbaijan was estimated at 3.349 million tons, by 3.9% more than a year earlier. My research 15 years ago showed that Azerbaijan's annual demand for food grain does not exceed one million tons of grain. This means that the country covers these needs through domestic production. Of course, if the official figures are not fabricated. And the allocated multimillion-dollar subsidies really reached their destination. And there is a reason not to trust these figures and it is weighty.

The fact is that the country imports 1.3 million tons of grain per year, again for food needs, in addition to local grain (3.4 million tons). The question is: “If this is a cat, then where is the pilaf? And if this is pilaf, then where is the cat?" (the question by  Mullah Nasir-ud-Din, who was famous in the East for his cheerful mind and wisdom of words,  from the anecdote about  his wife, about a cat , and about pilaf.)

Since the beginning of the 2000s, the state grain fund has been increased from 200 thousand tons to 750 thousand tons. As I said, these reserves should be quite enough for 10 months. The question is, where are the stocks, are there any storage facilities in the country for storing such stocks, and where did these stocks go, which are imported into the country duty-free by companies close to the authorities, and are immediately sent after processing in the form of bakery products to counters. This  gives fabulous profits to the companies supplying grain through this state preferential channel.

Another question. After gaining independence, fodder grain of 4-5 classes is imported into the country for food needs, which is unsuitable for baking bread and has no food value. Therefore, for its production, chemicals, fillers that are harmful to human health are used. In 2012, after my next article on this topic, the State Committee for Standardization, Metrology and Patents held a meeting of grain suppliers and bread producers. The situation has improved somewhat. The people stopped talking about the so-called potato disease. But later and to this day, forage again began to dominate supplies.

Now about world prices. We look at  the price at the elevator in the port from 11.29.21 to 12.03.21 of wheat in Krasnodar, Rostov, Stavropol is $ 225 per ton + $ 70 export duty. In fact, they have decreased compared to September, when the price at the elevator was in the range of $300 per ton. 

Over the past 10 years, wheat prices have been falling all the time, but for some reason prices in Azerbaijan have been growing. 

In early 2008, the Russian export price was $490 per ton FOB (Novorossiysk).In 2010, prices rose by 50% .

So, the current situation on the grain market is not sensational and more than usual. Then what's the matter? I am waiting for an answer to this question from the authors of the appeal and the government. I also expect the authors of the appeal to be legalized. The country must know its heroes.