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Govt Asks Millers to Justify Looming Flour Price Increase

August 6, 2008

By Ben Arnold O. De Vera, The Manila Times, Philippines

Aug. 7–The Department of Trade and Industry is asking flour millers to justify the looming price hike of flour.

Flour millers will reportedly increase their prices by P13 per bag, from P957 to P970, within the next two weeks. They claimed that the increase is necessary because of the rising cost of wheat.

“We are asking them to substantiate the initial explanation on this new round of increases in the price of flour despite modest or near-stable behavior of wheat prices these past months,” Trade and Investment Secretary Peter Favila said in a statement Wednesday.

The department said its monitoring report shows that the price of hard flour has been stable since May, ranging from P870 to P980 per 25-kilogram bag. Hard flour is a main ingredient for breads, including the local breakfast staple, pan de sal.

The Trade department added that global prices of hard spring wheat actually slid from April to mid-May, as prices stood at $471.70 per ton, or almost a half lower than the peak recorded in late February, when wheat cost $818.70 per ton.

Favila also quoted a report of the Food Agricultural Organization and World Bank Commodity Price Data and Market Review that said, “Favorable weather conditions and greater confidence in more recent plentiful supplies in the new season have driven [wheat] prices down sharply in the second quarter of 2008.”

Also, there would be ample wheat supplies this year as major wheat exporters, such as the European Union, Australia and Ukraine, noted a rebound in their production of the said commodity, the secretary said. Wheat comprises about 95 percent of flour production costs.

Given that flour and wheat prices are stable, the least that the flour millers could do is to maintain prices, Favila said, adding that, “Flour millers have a lot of explaining to do and they have to be very convincing that the planned increase is justifiable.”

Trade Undersecretary for Consumer Welfare Zenaida Maglaya added that the department also wanted to clarify speculations that the increase in the price of flour would be actually be between P40 to P50 per bag, adding that she got this information when she consulted bakers groups.

The Trade and Investment department estimated that such rise in flour price could jack up the cost of pan de sal by P0.25 per piece and the price of loaf bread by P1 to P1.50.

Maglaya said in a statement that the government is not denying flour millers their right to a fair return on investment, but they have to justify the increase and consider the plight of bakers and the consumers.

Over the weekend, bakers groups also announced that once the price of flour increases, the cost of pan de sal could rise by 25 centavos per piece, while a loaf of bread could go up by P1.50.

Chito Chavez, vice president of the Philippine Federation of Bakers, said rising prices of liquefied petroleum gas (LPG) and shortening also add to the cost of bread production, leaving bakers no other choice but to increase prices of bread.

Chavez said bakers groups are hoping that the government will find ways to stabilize prices not only of flour but also of other goods used in making bread.

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