Skyrocketing flour prices to come in Hungary after the end of the price cap?!

According to experts, a significant increase in flour prices is expected after the end of the price cap period. Thus, consumers will have to dig deeper into their wallets from 1^st May.

This assumption is based on the fact that current flour prices are based on a wheat price of around EUR 270-283 (~HUF 100-105,000) per tonne. As the market price of wheat is currently at EUR 351-364 (~HUF 130-135,000), this can only be calculated by including the cheaper wheat carried over from last year, as well as the more expensive wheat. In recent weeks, the surging wheat prices on the market have also resulted in higher consumer prices. In January, the price was around EUR 0.40 (~HUF 145) per kilo, but this has recently increased to EUR 0.45 (~HUF 165).

Therefore, the price increase is also inevitable for consumers.

There is only one scenario by which this can be avoided: if the Hungarian government decides to extend the price freeze currently in force until 1st May.

According to Zoltán Lakatos, President of the Grain Association, small stores may now be incurring heavy losses, while chains with higher margins may be spared. Another bad news is that consumers will also likely face a significant price increase in June and July due to the rise in wheat prices. By this time, mills will most probably reach the transfer prices of around EUR 0.54-0.59 (~HUF 200-220).

Since the introduction of the price cap that stabilised the price of wheat flour in the market at the price level of 15th October, the transfer prices of small packaged flour have stayed more or less the same. Retailers defend themselves by saying that they were only ordering the previous average quantity of the price-fixed flour. The millers would like to increase the prices of these products too, but at best they can only do so in the case of the larger chains – reported by Világgazdaság.

Hungarian wheat has greatly benefited from the rainy weather in recent days. Thanks to this, there was a possibility of a medium harvest on a slightly larger area than last year. Beyond the weather, however, the development of the war between Russia and Ukraine is an even more crucial issue. If the war does not end and exports are free, there will be a huge suction effect on export markets, pushing up prices even further, as the loss of Ukrainian and Russian exports would mean a shortfall of around 30 million tonnes from the Middle East, Turkey and North African countries.

Read also: Food shortages in Hungary? Here are all you need to know

If the situation in Ukraine will not consolidate, it seems likely that very high initial prices could be reached at harvest. As a result,

even the current historic record flour prices could be surpassed which will then affect the cost of bakery products.

According to the expert, this can lead to a noticeable drop in consumption.

According to the Hungarian Minister of Agriculture, there is no reason to worry as long as there is enough wheat, maize and potatoes to meet the basic nutritional needs of animals and people – reported by Infostart. Therefore, the supply of the Hungarian and European population is guaranteed. However, for the countries of North Africa and the Middle East, serious food supply problems may occur, because they live almost exclusively from the Ukrainian territories. Starving in these countries can even result in a significant migration to Europe.

Read alsoHungary has the highest price increase in the EU

Source: vg.hu, infostart.hu