No worry yet over flour prices

Mark Titus, Business Reporter

The head of Jamaica's sole wheat-processing facility says there is no immediate supply threat or price spike to domestic consumers, despite global worry over the possibility of a shortfall because of a drought in Russia and floods in India, which have effected crops.

"We have at the most two months supply brought forward, so we are good for the next couple of months, " said Derrick Nembhard, managing director of Jamaica Flour Mills (JFM).

"So, between now and certainly the end of September, our prices here will be stable because we have brought forward," he said.

Shortfalls

The global wheat market was jittery on Monday when Russia's prime minister Vladimir Putin announced a ban on the export of the commodity because of shortfalls in production - the result of the country's worst drought in more than 130 years, as well as summer fires. The Russian harvest is down by a third, to 60 million tonnes.

Additionally, in India, monsoon rains have caused problems with the harvest. This has been compounded by the fact that the 210 million tonnes of stockpiles could be lost because of inadequate storage.

A locust plague in Australia and excessive rainfall in Canada deepened concerns, leading to a buying frenzy on the wheat markets this week, driving prices up.

Good news

The panic, however, appeared to be abating yesterday, in part because of relative confidence that the impact on the Australian and Canadian harvest would not be as bad as initially feared. Hints from Russia that exports could be resumed in October helped.

Prices on the Chicago Board of Trade (CBO), having reached US$8.40 a bushel, fell back $1.12, or more than 12 per cent.

That, on the face of it, is good news to Jamaica. JFM - a subsidiary of the United States grain and agro-processing firm, Archer Daniel Midland - converts around 180,000 tonnes a year to flour. Under half of that is spring (soft) wheat used for bread. The rest is used for other products. Higher costs for wheat and grains helps to push up consumer prices.

With yesterday's softening of prices, analysts are hoping the retreat will continue.

"What will happen between now and then (when JFM needs to restock) depends on the market and on how stable it becomes," Nembhard adds.

But Nembhard is of the view that if there were a reduction of the carry-out stock - which is the inventory for wheat at the end of the year - the effect would be minimised. "If that is not done you will have an increase in the prices to relatively slow down the demand for the product."

Officials like Nembhard hope that the fallback sticks and goes even further ahead of the need to restock JFM silos.