Thursday January 10, 2008
Higher wheat prices linked to flour shortage
PETALING JAYA: One factor contributing to the shortage of wheat flour locally is that flour producers who export are taking advantage of the higher prices overseas, according to an economist.
Aseambankers chief economist Suhaimi Ilias said other factors were hoarding by wholesalers and panic buying by consumers.
“Malaysia, being a net importer of wheat to produce flour for local consumption, is affected principally by higher raw material costs faced by flour millers,” he said in an e-mail interview on Tuesday.
Domestic Trade and Consumer Affairs Minister Datuk Shafie Apdal has assured consumers that they would not have to worry about any impending shortage of general-purpose flour as the situation was under control.
Pressures on wheat price raised the cost of non-price-controlled flour locally and forced the Government to raise the controlled price to RM1.35 per kg from RM1.20 per kg in May last year, Suhaimi noted.
“We understand there could be another round of increases in the controlled price of flour after the first quarter of 2008,” he added.
Suhaimi said the rise in global wheat prices was exacerbated by speculative investments by fund managers in commodity futures.
He explained that the wheat shortage was mainly due to poor harvests in major producing countries, especially Australia which had suffered from drought in the harvesting season last year.
“However, the harvests in Australia and Argentina in the next harvesting season this year have improved because of weather conditions,” he added.
Azrul Azwar Ahmad Tajudin, Bank Islam Malaysia senior economist, believed rising prices of agricultural commodities including wheat was due to surging oil and gas prices.
“It (oil) is the main culprit,” he said.
He said the surge had caused a spillover effect on the commodities and only a reverse in oil prices could bring down the prices.
He noted that food prices would continue to rise, marking the end of the “cheap food era.”