Nov 19, 2008 News
The National Milling Company of Guyana Inc. (NAMILCO) has announced that the price for flour will be reduced by an overall 17 percent on 45-kg bags and the consequential reduction in packets. This reduction is effective from today.
Managing Director of the milling company, Bert Sukhai, made the announcement yesterday at a press conference held at the company’s head office in Agricola, East Bank Demerara.
He explained that the decreased percentage is calculated using the increased prices as at May 5, 2008, versus the new prices, which means that most bakers will benefit from a $1,280 reduction per bag of flour.
Consumers are also to benefit from a reduction of $20 per kg on Thunderbolt packet flour. The wholesale price for a bag of Thunderbolt flour will now be $6,175 while the retail price will be $6,220. Earlier in the year the prices were $7,390 and $7,500 respectively. From today, a one-kilogram packet of Thunderbolt flour will decrease from $185 to $165.
NAMILCO is confident that everyone in the chain will show corporate responsibility and pass the benefits to the end users.
“Consumers should report to us if they are not benefiting from reduced prices at least by this weekend, and to the Ministry of Tourism, Industry and Commerce who we all know has been waging a constant battle to keep prices down,” Sukhai urged.
He added that the milling company cannot apply sanctions to those who would not lower prices. He noted that all the company can do is to talk to their respective people through their marketing manager, advising them to reduce their prices.
“We would go around and talk to them. The company is now trying to bring the price down to the consumers by going out in the form of competition and selling it to the people, so as to reduce the mark-up that people put on flour which I think is very excessive,” the managing director told the media.
Last April, the flour company had increased the price for the commodity, due to the skyrocketing price for wheat on the international market. As such, President Bharrat Jagdeo had moved to keep prices down by implementing a subsidy on bakers’ flour for the full increase of $1,500 per bag and a limited subsidy on packet flour.
This had helped tremendously in keeping prices for bread and other flour products down for the period May to August this year.
Sukhai said that in the second half of 2007 and early 2008, the price of wheat kept increasing and NAMILCO bore some of these increases without passing it down to consumers.
He explained that in Guyana and elsewhere, it has been observed that when prices increase, consequential increases are immediately passed down to the consumers by the wholesalers, retailers and commercial users of that particular product.
However, he added that when prices decline, the reverse seldom happens.
“We heard a lot of noise from all quarters when the price of flour went up earlier this year and NAMILCO was seen as the guilty party although we all knew what was happening worldwide to grains, including wheat. No one criticised us when we held prices in a rising wheat market, but when the price of wheat started falling internationally, we came under severe criticisms,” Sukhai noted.
He explained that purchasing wheat is a lengthy process and it takes time from hearing the news about falling prices to when that benefit reaches the consumers. According to Sukhai, purchasing wheat involves a lot of logistics, as the wheat has to be ordered at the right time, the vessel to bring the wheat has to be tendered for, and then placed in a queue to be loaded for shipping.
“Because we order different types of wheat, storage limitations have to be considered. We bring in about six shipments per year and in a falling market would tend to purchase when required (what the commodity traders call hand to mouth). So although we were seeing falling prices, we were unable to decrease prices to what they were earlier in the year as it took some months for the benefit to reach us,” Sukhai explained.
He noted that since April, NAMILCO has seen increases in labour, packaging and power costs, which he noted had to be factored into the price.
He explained that buying U.S. dollars to pay for wheat has been costing more recently as the company has observed a slight decline in value of Guyana’s currency.
Meanwhile, he added that Jamaica would not reduce their food prices, including flour, because of the steady devaluation of the Jamaican currency.
It was noted that the price of flour in Jamaica is in the high $40 range.
“During the period of high wheat prices, NAMILCO was proud of its achievement in keeping prices at a level which was over $2,000 per 45-kg. bag cheaper than the cheapest flour in the Caribbean. The current prices for flour in Trinidad and Barbados are $45 and $48 respectively versus our price of less than $30.
We are extremely pleased that our consumers will benefit from reduced flour prices and the consequential reduction that would result for bread, chowmein and other flour products,” Sukhai said.
The managing director explained that although the company had increased the price for the commodity, NAMILCO did not experience a decline in demand from consumers. “Flour is something that people will eat and in Guyana it’s a staple. With the high prices, I don’t think it affected the demand significantly. People still wanted flour to buy, and to eat, so we didn’t see any sort of significant decline in the demand for flour.” (Fareeza Haniff)
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