Businesses bracing themselves as Prima plans phased price hike
Jessica Lim Straits Times 7 Aug 10;
THE effects of a Russian ban on wheat exports will soon ripple through Singapore: Prima Limited, the largest importer of the grain here, is planning to hike flour prices, a move that will impact a wide variety of industries, from bakeries to noodle-makers, as well as consumers.
Prima, the main supplier of flour to businesses here, declined to say when prices would rise, or by how much.
But its executive director, Mr Lewis Cheng, told The Straits Times yesterday that the recent surge in global wheat prices had a 'definite impact' on the company.
'With this huge jump in material costs, we have no choice but to increase our flour prices,' he said, adding that prices will go up gradually, and in phases.
Industry players, such as Singapore Food Manufacturers' Association president Wong Mong Hong, think the increase will be 'substantial'.
'Flour is totally made from wheat,' he said. 'The increase in the price of wheat will have a direct and significant impact on flour prices. The increase is unlikely to be small.'
Wheat prices have doubled in less than two months as drought slashed the harvest in Russia, the third-largest grower, and rain cut Canadian output. Russia's drought is also threatening sowing plans for winter grain.
The price surge may herald a new food crisis if it drives up the price of corn and other staples, warned a trade group from Indonesia, Asia's top wheat buyer.
'There will be a domino reaction and we expect corn demand will rise, pushing prices higher,' said chairman of the Flour Mills Association in Indonesia Franciscus Welirang.
The situation was compounded by a decision on Thursday by Russian Prime Minister Vladimir Putin to ban all exports of grain as a severe drought wilted millions of acres of wheat plantations.
In Singapore, businesses are bracing themselves for the aftershocks of Prima's impending price hike, and said they would have little choice but to raise their prices too once this happens.
The chairman of the Singapore Bakery & Confectionery Trade Association, Mr Liow Kian Huat, said the grouping's 150 members are unlikely to be able to absorb more than a 10 per cent increase.
'Any more than that and it gets difficult. There is nothing we can do about it. We cannot hoard flour now because it will just go bad,' said the baker in Mandarin, adding that he currently pays about $27 for a 25kg bag of Prima's flour.
Mr Leong Han Hin, the owner of Hung Wen Noodle Manufacturer, agrees. He supplies noodles to hawker centres and coffee shops around Singapore.
'If prices go up, what can we do? We will try to absorb until we can't,' he said.
Retailers, such as supermarket chain NTUC FairPrice, said they have not been informed of any price increase and are monitoring the situation.
Prima is Singapore's only flour mill, and accounts for more than 95 per cent of the wheat imported into Singapore.
It converts the wheat into flour, which is then sold to retailers and food manufacturers like noodle-makers and bakers.
Industry players say that more than half of all the flour used here is from Prima. The rest is imported from countries like Malaysia and Indonesia.
One immediate effect of the price hikes will be to put a dampener on major festivals that will occur in the months ahead, said Mr Wong.
'Festivals like Hari Raya and Deepavali are coming up, and we can expect prices for goodies to be much higher than in other years especially since a lot of them are largely made of flour,' he said.
Singapore imported 180,208 tonnes of wheat last year, more than half from Australia. Much of the remaining amount came from Canada, Malaysia and the United States.
Though Singapore does not import wheat from Russia, the ban has sent prices of the product from other countries through the roof.
Wheat futures on the Chicago Board of Trade rose to a peak of US$8.41 a bushel yesterday, the highest level in about two years, while shares in European brewers and food producers fell as markets reacted to the sudden imposition of the ban on grain exports from Russia.
