Bread, noodles, others to cost more as Russia wheat ban bites

Nigerian consumers face paying more for bread, pasta, noodles and hundreds of processed foods after Russia banned the exportation of wheat.

Russian wheat is said to constitute about 36.4 percent of total world export of the commodity. The country is the world’s third biggest exporter of wheat.

The ban, which surprised traders and food companies, set wheat markets on fire. It has affected prices in the US where Nigeria buys 90 per cent of wheat milled in Nigeria . In Chicago , US wheat hit an intraday high of $8.41 a bushel on Friday, up more than 25 per cent on the week and, excluding the 2007-08 food crisis, a record high.

Since 2001 when US Wheat associates opened a technical service office in Lagos, average annual wheat sales to Nigeria have doubled from about 1.5 million metric tonnes to almost 3 million metric tonnes, returning billions of dollars back to the U.S. economy. Nigeria spends about N6 billion to import wheat annually, according to federal government source.

It is feared that Russia ‘s action could trigger a new global food price crisis as the drought-hit country said it could extend the export ban into next year.

Russia’s decision to ban wheat exports is fueling anxiety among the international community that an international wheat crisis could lead to massive food shortages in most countries.

International markets have already witnessed a 40 percent increase in wheat prices. The United Nation’s Food and Agriculture Organisation (FAO) warned of “serious implications for world wheat supplies in 2010/2011 should the Russian drought continue.”

Meanwhile, the effect of the ban is already being felt in some countries including Egypt and South Africa .

Prices of other products made from related raw materials such as corn, soybeans, rapeseed and barley have also jumped sharply. This wider rally reflects not just the direct impact of the drought on these commodities, but also the fear that lower supplies of wheat, which is also used in livestock feeds, could lead to higher demand for alternative animal feed such as corn.

According to an industry stakeholder, Innocent Azih, senior consultant and head of agriculture at the Nigerian Economic Summit Group (NESG): “Given the role that wheat plays in our eating habits -confectionery- prices might go up and very sharply. This will create more hardships, hunger and exacerbate poverty in Nigeria .

“It is also my opinion that it provides an opportunity to get our policy makers and technology experts to quickly resume discussions on gradually altering the taste of Nigerian consumers for exotic foods, with respect to wheat-denominated food products.

“There is no reason why we should not begin to promote food items processed from our local produce, including confectionery. This is a critical time to, for once, stop and think.”

Yusuf Ageni, public relations adviser, Nigerian Breweries Plc, said: “The impact of Russia ‘s action is too remote now for us to worry about, but it is natural for human beings to adjust to changes. If the fallout touches us, we would adjust accordingly”.

Nigerian Breweries “does not use wheat but imported malted barley that is for industrial consumption. The sorghum we use is locally produced. We are thus encouraging local production of raw material through this,” he told BusinessDay.

Lateef Oguntoyinbo, chairman, Lagos Association of Master Bakers, said: “For now, we have not felt any impact of the wheat crisis. But we are keeping our fingers crossed. When the problem gets to us we know how to handle it.”

According to him, the open option is to adjust the prices of bread, pasta products including noodles, spaghetti and hundreds of processed foods upward if the wheat crisis fallout gets to Nigeria .

Said he: “In the past, when the prices of flour and allied products went up we adjusted our prices accordingly. We will react same way if price of flour goes up with the Russian action”.

According to Femi Deru, president, Lagos Chamber of Commerce and Industry (LCCI), the jump in prices following the Russian ban when it gets to the country will be “a lesson for Nigeria”.

He recalled that there was a government policy that five percent cassava flour should form part of the flour produced by millers in the country “yet we are foot-dragging on this vital policy. It is important we develop and research into the use of substitutes to wheat flour”.

Chamberlain Peterside, an investment analyst based in New York , argued that the only way is for wheat-related businesses “to jack up prices concomitantly, else that will eat into their margin – it’s that simple”.

He said ” Nigeria could be potentially hard hit given that it’s a huge importer of wheat and consumer of wheat products that feed the teeming population. If the high prices are sustained then government and manufacturers must actively and continuously seek alternatives to wheat in bread and bakery production.”

Solomon Onafowokan, immediate past president of LCCI and current vice president of Nigerian Association of Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA) said: “The envisaged ultimate impact of Russian ban on wheat export will definitely have adverse consequences on our flour millers here, although USA is still the major supplier to Nigeria, but the gap so created by Russia would be felt in terms of price and delayed supply chain. However, it may well promote the five percent (formerly ten percent) cassava mix which had been abandoned by all flour millers in Nigeria on a happy note.”

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