The price of flour sold in wholesale markets in Yerevan has risen by about 10 percent in recent days. Some bread retailers across the city have already adjusted their prices accordingly.
Flour prices already soared by more than 20 percent last summer as a result of a severe drought in Russia, Armenia’s leading wheat supplier. The Russian government banned wheat exports in early August, citing heavy damage to grain crops across the country.
The ban is seen as one of the reasons why global wheat supply has remained tight since then. Among other factors are concerns about crops in top producing countries
after adverse weather, including dryness in the United States.
In the European Union, the world's second-biggest wheat exporter, prices doubled in the 12 months to January 18. European milling wheat futures are now approaching record-high levels registered during the 2008 global food crisis.
“If Mother Nature is unfavorable, which is what it is doing at the moment, we are going to prolong the agony and we have not necessarily seen the peak,” said James Dunsterville, head analyst with Geneva-based Agrinews, told Reuters news agency last week.
“On Friday, the international price of wheat reached $330 per ton,” Samvel Avagian, an independent economic analyst in Yerevan, said on Monday. He said wheat costs $400 million by the time it reaches the Armenian border.
According to Avagian, this is what is primarily making it more expensive in Armenia. Local farmers meet less than half of the country’s wheat demand.
Armenia -- Economic analyst Samvel Avagian (L) and Armen Poghosian of the Armenian Consumer Association at a news conference, 24Jan2011.
Government critics and some analysts say that the price rises would have been less drastic had wheat imports to Armenia not been effectively monopolized by three companies belonging to government-linked businessmen. Armen Poghosian, chairman of the Armenian Consumer Association, on Monday blamed the latest hike on importers’ “impunity” and again accused state anti-trust regulators of inactivity.
Avagian agreed that internal factors are also at play. “Medium-sized businesses can’t enter this sector because they need large import volumes to make profits,” he told a news conference. “Transportation costs are high and you need to solve some issues with flour mills.”
“But small and medium-sized businesses can import flour,” added the analyst. “However, there has been a drastic reduction in flour imports in the past three years. None of us knows the reasons for that.”
None of the three wheat-importing companies could be reached for comment. For its part, the State Commission for the Protection of Economic Competition told RFE/RL’s Armenian service that it is “monitoring” the situation.
A further increase in bread prices would deal a blow to government plans to significantly cut consumer inflation, which hit an annual rate of 9.4 percent last year, surpassing the maximum government target of 5.5 percent.