Kyrgyzstan takes steps to control wheat prices

BISHKEK – As wheat prices soar to new highs, Kyrgyzstani authorities are taking steps to secure uninterrupted bread and flour supplies for citizens and prevent further price hikes.

“Bread is the basic food product in our family,” said Eliza Mambetakunova, 42, of Krasnaya Rechka in the Issyk-Ata District, Chui Oblast. “We can do without meat, cereals and vegetables for a while, but we can’t live a single day without bread.”

Since February 25 the price of a 400g loaf of bread has gone from 11-12 KGS (US $.23-.25) to 13-16 KGS ($.27-.34), an increase of 15-30%.

Similarly, a 1kg loaf has gone from 30 KGS (US $.63) to 33-35KGS (US $.70-.74), a 15% increase.

The price increases are hurting bakeries as well, said Akbar Atakeyev, head of Kyrgyzstan’s Bakery Association, after a February 22 meeting at the State Antimonopoly Agency. He said bakeries today earn only 0.14 KGS (a third of 1 US cent) per loaf when paying KGS 27 (US $0.58) per kg of flour.

Compounding the problem, Atakeyev said, local flour mills have been raising flour prices weekly.

“We are facing other problems too,” Atakeyev told Central Asia Online. “Even with timely bill payments, power supplies to bakeries have been cut off now and then, inflicting additional losses on us. Bread deliveries to the shops have also been problematic because of traffic-restricting road signs everywhere.”

Bread prices have increased because of domestic wheat shortages, Seyitbek Asanbayev, head of the Antimonopoly Agency’s Competition Evaluation Analysis and Price Monitoring Department, said.

“Today, we purchase grain from Kazakhstan at US $380 per tonne, versus US $132, excluding customs fees, in early 2010,” he said. “The price of wheat has grown 152% over the same time from KGS 6 (US $.12) to KGS 15.1 (US $.32) per kilo.”

Worldwide drought

Between June and January, Kyrgyzstan showed the highest wheat price increase in the world – 54% – because of low grain yields in drought-stricken wheat-exporting countries, a World Bank report said.

Last year, Kyrgyzstan harvested 813,000 tonnes of wheat, including 550,000 tonnes of lower-grade industrial grain. That is not enough to meet the country’s per capita bread consumption of 160kg per year, Asanbayev said. The Kyrgyz population is about 5.3m.

To try to meet the demand – and to soften the blow to households – the government has ordered emergency measures. Prime Minister Almazbek Atambayev decreed the allocation of 10,000 tonnes of top-quality wheat from the state reserves to support vulnerable segments of the population and to stabilise bread prices, a February 25 Cabinet press release said.

kgwheatBread is one of the main staples for Kyrgyz families. [Maksat Osmonoliyev]

“As of March 2011, flour will be distributed free to the 123,568 low-income families with children entitled to receive monthly benefits, in strict accordance with the Social Protection Ministry instructions: 50kg of flour per family,” the document said.

Besides, each farmer in Kyrgyzstan will be entitled to a favourable loan of 50,000 KGS (US $1,075) to 200,000 KGS (US $4,300) at 9% interest, Agriculture Minister Torogul Bekov said.

“The total credit of 1 billion KGS (US $21.5m) will be distributed by commercial banks in the regions with due regard for the size of sown areas and the number of farmers there,” he said. “Of that credit, 25% will go to the farmers sowing wheat, to ensure the country’s food security.”

In addition, procuring 100% of the seeds of wheat, barley, maize and other crops will cost nearly 964m KGS (US $20.7m), Bekov said.

kgwheatapPrice-gouging alleged

Greed at home might have helped push up grain prices.

“Grain prices soared because of the grain dealers who raised the price of local wheat to 4 KGS (US $.08) per kilo,” Economic Regulation Minister Uchkunbek Tashbayev said in an interview after addressing parliament February 24. “The wholesale price of a 50kg bag of flour rose 2 KGS (US $.04) to nearly 30 KGS (US $.64) per kg.”

Flour mills in Kyrgyzstan now must purchase wheat from Kazakhstan at high prices, resulting in a 50kg bag of premium flour costing 1,275 KGS (US $27.50), the minister said.

“The price of Kazakhstani grain rose from US $295 per tonne in December to US $349 in January,” Tashbayev said. “Grain reserves are petering out and pushing wheat prices up.”

With the situation being “more than alarming,” the government must support farmers and ordinary citizens with credits and subsidies, Shailoobek Musakozhoyev, a professor at Kyrgyz Economic University, said.

To cut costs, flour mills and bakeries need a discount on power bills, and the government needs to reduce tariffs on imported agricultural commodities, Musakozhoyev said.

The Energy Ministry is already considering bakeries’ complaints about power supply disruptions, ministry spokesman Serkhon Adalet said.