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DateLine Sunday, 30 September 2007

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Price of bread increases as wheat supply wanes

The price of bread has gone up as the wheat in world market has dropped due to climatic changes which affected the wheat producing countries adversely. Developing countries such as Sri Lanka are badly affected as a result of this situation.

With the immediate price hike of wheat flour by the Prima Company from last Friday mid night, the new price of a loaf of bread (450 grams) is Rs.35. A loaf of bread of 400 grams is Rs. 31. Buns and other flour products have also been increased by Rs. 1.50 to 2.00. The price of one kilo of flour is Rs. 64 which is an increase of Rs. 13.

The All Island Bakery Owners' Association President Parakrama Dissanayake had said that with the new price of flour they lost over Rs. 5.50 when they produce a loaf of bread weighing 450 grams. He is also worried that with every increase of price of flour, the sales dropped considerably. Anyway, the reason for the price hike of flour products is the price hike of wheat which has surged to US $ 9.1125 a bushel for the first time.

Wheat prices in the world market have a hit record high, giving rise to fears of a supply shortfall. Anyway, the yield from wheat farms has drastically dropped world over due to the adverse environmental conditions. This tragic situation was experienced by major wheat producing countries such as America, Canada and Australia. Harvest in China has depleted by recent floods and drought.

BBC News reported that the world's third largest producer of wheat, Australia's production has fallen by 15 million tonnes due to the drought last summer. This situation has a direct impact on Sri Lanka as we import wheat from Australia. Last month the US Department of Agriculture forecast global wheat supplies dropping to a 26 year low, and this forecast was expected to be revised later, BBC News reported.

Another important factor which widens the gap between supply and demand in the world market is that India and Pakistan which are among the World's 10 largest wheat producers are in process of buying wheat from the world market. Even India has received import offers for the supply of 530,000 tonnes at a price range of US $ 385 - 434 per tonne according to international media. In such a situation, a developing country such as Sri Lanka has to competes with other buyers at the world market.

According to one of the world's most important economic data providers, "DOW JONES" Company, wheat prices hit an 11 year high at the Chicago Board of Trade earlier this month, as global wheat inventories have sunk to the lowest level since 1981-82. It also says that the world's demand for wheat is 640 million and supply would be insufficient.

 

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