Supply shortage and conflict in Ukraine drive up flour prices

The price of flour is expected to rise in April due to the war in Ukraine, which will see food items cost more, further weighing on consumers, industry players said.

Ukraine and Russia are the largest wheat exporters in the world. With the two countries at war, Russia has blocked exports, leading to supply shortages around the world.

Russia has also blocked wheat shipments from Ukrainian Black Sea ports that border Crimea.

Chairman of the Johor Baker, Biscuit, Confectionery and Mee Merchants Association, Chink Poh Cheng, said the price hike would be the highest in history as it is exacerbated by the supply chain problem caused by the Covid-19 pandemic.

“The cost of sea freight is high and it is difficult to find containers (to transport goods),” Chink told The Malaysian Insight.

“While the pandemic is now under control, the war between Ukraine and Russia is causing a wheat crisis because they are big exporters.”

Chink said mills have informed companies that prices will rise from next month.

This will be more than the 20% increase previously, he said.

“Some factories didn’t reveal how much it would cost, but they started limiting supply to avoid shortages.”

Besides flour, the war is also having a knock-on effect on global fuel prices, which in turn raises the prices of everything else, Chink said.

“All raw materials used in the food industry, including plastic, are increasing in price.

“The government’s decision to suddenly increase the minimum wage to RM1,500 adds to our problems.

“There is no doubt that in April food prices will see another wave of price increases. How much will depend on each manufacturer.

Chaang Tuck Cheong, a producer of chee cheong fun (rice noodle roll) said another round of price hikes had put pressure on the industry.

As raw materials have risen over the past two years due to the pandemic, manufacturers have absorbed costs to ease the burden on consumers, he said.

“Everyone has reached a point where they can’t bear to absorb it anymore. It’s not just about the price of flour anymore, the prices of other raw materials are also going up.

“To make chee cheong fun, we use sago powder, wheat starch, corn flour, potato flour, all of which have doubled in price.

“Sago flour and wheat starch increased by 200% in one year. Previously it cost RM50 for 25kg, but now it costs RM100.

Chaang said the mills have not yet decided on the new price, so chee cheong fun prices will be adjusted accordingly next month.

Lai Yee Kin, chairman of the Malaysian Bakery, Biscuit, Confectionery and Mee Association, said manufacturers will also look at the cost of other raw materials before adjusting prices.

“How much it will increase depends on individual manufacturers,” he said.

“Those who use automation, the cost will be lower. If they use more labor, the cost is higher.

As manufacturers adjust their prices based on global trends, they are still unable to make a profit, Lee said.

“If we won 10 sen before, now we only win 8 sen, we can’t win more.

“That’s because we have to absorb some of the cost, otherwise the price hike will be too big and weigh on consumers.”

According to the Federation of Malaysian Grocers, flour prices will rise between 7% and 11%.

This means that a 25kg sack of flour will increase by RM7 while the wholesale prices will increase by around RM2.50 for 10 x 1kg sacks of flour. – March 26, 2022.

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