How did soaring global wheat prices affect Azerbaijan?

The biggest Azerbaijani flour and bread producers have circulated an appeal, Report informs.

“As is known, due to the ongoing global negative processes, uncertainty, pressure on production and supply chains, as well as due to the COVID pandemic, global food prices have risen sharply. These processes have also affected the price of wheat.

Wheat is imported to Azerbaijan mainly from Russia, so the rise in prices in the market of this country leads to the supply of this product to Azerbaijan 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 for one ton of 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%,” reads the appeal.

However, in order to reduce the negative impact of the rise in world prices on the Azerbaijani market, the state provided significant support to importers and producers of flour throughout the year. So, in order to bring the stocks of wheat in the country to the required level, starting from 2020, subsidized loans are allocated to suppliers. In addition, since February 2021, subsidies have been paid to flour producers, and the import and sale of wheat, as well as the sale of flour and bread, were exempt from VAT. As a result of these measures to support entrepreneurs, world price changes didn’t have a serious impact on the Azerbaijani market, which made it possible to maintain the wholesale price of a 50-kilogram sack of flour at 26 manats (around $15).

Considering that the existing subsidy mechanism was in force until the end of December 2021, necessity emerged to bring flour prices in line with the current price for wheat in order for wheat importers and flour producers to continue their activity, to reliably provide Azerbaijan with this strategic food product, as well as preventing the threat of a deficit.

“According to our calculations, as a result of the adjustment, the wholesale price of a 50-kilogram sack of flour may rise to 36 manats (around $21), which is why the price of standard (round) bread is expected to rise by a maximum of 10-15 qepiks (about 5-7 cent).

Aware of our important role in providing food to our citizens, we declare that although the price of flour will be brought in line with the current price of wheat, we will mobilize all our efforts to ensure that the prices of bread and flour products do not rise above the level we set for the period until the harvest of 2022. We call on everyone in the food supply chain to stand in solidarity with us,” reads the appeal.