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FLOUR PRICES IN ARMENIA ARE 40% LOWER THAN GROWING WHEAT PRICES
Aram Gareginyan, ArmInfo
arminfo
2011-01-25 11:17:00
Interview with Director of Mancho Group LLC Ivan Mosoyan
All goes through the mill... but for how much? A week ago Director
of Manana Grain LLC Gurgen Nikoghosyan told us that the wheat prices
in Armenia~Rs regions have redoubled since the summer 2010. Why then
haven~Rt the flour prices followed suit?
How much behind are the flour prices from the wheat prices?
Formerly, we bought wheat in Poti for $200-220. Today, it costs $400.
In other words, in the last six months the price has redoubled. Half
a year ago flour prices averaged $21-22 per 50 kg, today, they are
$28-29. Considering the rise in the wheat prices, they should have
been $42-43.
There has been no grain export from Russia for five months already
and a week ago Ukraine said that in 2009 it produced 19.4% less grain
than in 2009. How risky might this be for us in terms of prices?
Russia~Rs ban and the situation in Ukraine have certainly influenced
the wheat market. As you may know, today Ukraine~Rs grain market
is not fully open. They have export quotas. For wheat the quota was
500,000 tons, now, it is 300,000 tons. We don~Rt know how much wheat
will be sent to Armenia. We haven~Rt received any Ukrainian wheat yet.
There are certain procedural difficulties. According to the law,
you can load a ship with as much wheat as the quota allows but at the
port you are faced with new problems: your ship remains loaded and you
have to pay demurrage. We have received no wheat import permission
from Ukraine yet but are actively working towards this end. Nobody
wants to import wheat from as far Kazakhstan or Bulgaria, especially
as the Ukrainian wheat is better. The Kazakh wheat is also good ~V
as good as the Russian one ~V but its transportation cost is as high
as $60-80 per ton. In terms of price it would be more profitable
for us to import wheat from Ukraine, Bulgaria or even Romania and
Hungary. But the best wheat is produced in Russia and Kazakhstan,
followed by Ukraine, Hungary, Germany and Bulgaria.
And what is the cost value of Ukrainian wheat for the moment?
In the last 7-10 days the CIF price of Ukrainian wheat at the port of
Poti has grown from $345-350 to $385-390. Georgia~Rs railways have
also raised their tariff - from $23 to $26 per ton. Add $18-20 per
ton for bringing the wheat from Ayrum (the Armenian-Georgian border)
to Yerevan and at least $60 for customs clearance and VAT. And as a
result you will get $510-520.
Wheat is cleared at 32% with VAT and customs duty inclusive?
No, at 20% (the duty exclusive) if imported from the CIS and at 32%
if brought from other countries or having no certificate of origin.
Do you import feed wheat as well?
Yes. Today the prices of feed and milling wheat in Ukraine are almost
the same. The difference is just $10 against $50-60 a couple of months
ago. Some two months ago we could import feed wheat at $295-300 per
ton, today, the price is $435-440.
Iran has become one more supplier for us. We are the only company who
imported 12,000 tons of wheat from Iran at the beginning of this year.
The first batch was 4,000-5000 tons of third grade wheat. But when
the batch came it turned out that it was feed wheat. They in Iran
have different grade system. When I saw it I sent my representative
to Iran and he picked the best wheat they had.
How much is Iranian wheat?
The purchase price is $260 per ton. Add transportation costs to and
from Julfa and customs clearance and you will see that it is cheaper
than the Russian one.
Why then aren~Rt flour prices growing?
We expected that flour prices would gradually grow.
Our Government gives high priority to this problem and we are trying
to decide what minimum profitability we can work at. But at some moment
we will no longer be able to work at a loss. We must always have wheat
in stock for producing flour. We are forced to buy wheat at higher
prices, so, perhaps, this month we will fix a price that will ensure
our profitability and ability to import wheat on a constant basis.
10% rise in wheat prices will not have any impact on flour prices.
Flour begins to grow in price from the 15-20% level. We will keep the
flour prices for as long as we can and then we will let them go for as
much as 20%. Generally, flour and bread prices do not fluctuate much.
They try to keep the bread price ~V they even can ~Sblow~T air into
bread but when the price goes up they go back to the initial weight.
We allowed raising flour prices only after the New Year holidays. Only
now we are coming closer to the wheat prices. Today, 50kg of high
grade flour in Armenia costs almost $30 or 10,500-11,000 AMD. First
and second grade flours are 500 AMD and 1,000 AMD cheaper.
What share does the local wheat have in your flour production?
It is so small that it is not even worth mentioning. People gather it
the way they can, mill it the way they can at small flourmills. Since
the arable plots in Armenia are small, the quality of the Armenian
wheat is not equally high. One plot can produce very good wheat while
another one - wheat that can hardly be used as fodder.
Do you import finished flour?
Presently, we are negotiating with a number of organizations. If the
difference between wheat and flour prices becomes big enough we will
consider importing flour. Our key concern is the terms of delivery
rather than the price. We import flour only when we see that our
country needs bread. Besides, each local flourmill employs several
dozens of people. If we import flour they will lose their jobs.
What grades of wheat are imported into Armenia?
We have no clear grade system on the local market. Here we can use the
same wheat for making bread and confectionary. Our company imports
mostly wheat of third grade because if it turns out to be of fourth
grade it will still be milling wheat while if we buy fourth grade
wheat it may prove to be fodder.
Mancho Group produces confectionary as well. Did the rise in egg
prices in late 2010 influence the cost of your confectionary?
By the New Year egg prices grew but then they dropped again. These
fluctuations were caused by changes in the demand-offer ratio. If the
problem was in our hard food the rise in egg prices was quite logical.
Formerly, we bought eggs at 8-10 per egg, today, at 45-50 AMD. If
poultry farms buy food at a price that is 1.5 times higher than before,
the price should grow but it is for farmers to decide for how much.
Today, confectionary business is not very profitable. Confectioners
are just trying to stay afloat.
Can the National Seed Growing Development Program reduce the country~Rs
dependence on wheat import?
One can farm seeds only when one has arable land. Our lands need
amelioration and regular irrigation. You know how much our harvests
depend on rain. Seed wheat is very expensive. If feed wheat costs
over $300 per ton, seed wheat may cost almost $1,000. And you can~Rt
just sow it, you should first prepare the soil.
From: A. Papazian
Aram Gareginyan, ArmInfo
arminfo
2011-01-25 11:17:00
Interview with Director of Mancho Group LLC Ivan Mosoyan
All goes through the mill... but for how much? A week ago Director
of Manana Grain LLC Gurgen Nikoghosyan told us that the wheat prices
in Armenia~Rs regions have redoubled since the summer 2010. Why then
haven~Rt the flour prices followed suit?
How much behind are the flour prices from the wheat prices?
Formerly, we bought wheat in Poti for $200-220. Today, it costs $400.
In other words, in the last six months the price has redoubled. Half
a year ago flour prices averaged $21-22 per 50 kg, today, they are
$28-29. Considering the rise in the wheat prices, they should have
been $42-43.
There has been no grain export from Russia for five months already
and a week ago Ukraine said that in 2009 it produced 19.4% less grain
than in 2009. How risky might this be for us in terms of prices?
Russia~Rs ban and the situation in Ukraine have certainly influenced
the wheat market. As you may know, today Ukraine~Rs grain market
is not fully open. They have export quotas. For wheat the quota was
500,000 tons, now, it is 300,000 tons. We don~Rt know how much wheat
will be sent to Armenia. We haven~Rt received any Ukrainian wheat yet.
There are certain procedural difficulties. According to the law,
you can load a ship with as much wheat as the quota allows but at the
port you are faced with new problems: your ship remains loaded and you
have to pay demurrage. We have received no wheat import permission
from Ukraine yet but are actively working towards this end. Nobody
wants to import wheat from as far Kazakhstan or Bulgaria, especially
as the Ukrainian wheat is better. The Kazakh wheat is also good ~V
as good as the Russian one ~V but its transportation cost is as high
as $60-80 per ton. In terms of price it would be more profitable
for us to import wheat from Ukraine, Bulgaria or even Romania and
Hungary. But the best wheat is produced in Russia and Kazakhstan,
followed by Ukraine, Hungary, Germany and Bulgaria.
And what is the cost value of Ukrainian wheat for the moment?
In the last 7-10 days the CIF price of Ukrainian wheat at the port of
Poti has grown from $345-350 to $385-390. Georgia~Rs railways have
also raised their tariff - from $23 to $26 per ton. Add $18-20 per
ton for bringing the wheat from Ayrum (the Armenian-Georgian border)
to Yerevan and at least $60 for customs clearance and VAT. And as a
result you will get $510-520.
Wheat is cleared at 32% with VAT and customs duty inclusive?
No, at 20% (the duty exclusive) if imported from the CIS and at 32%
if brought from other countries or having no certificate of origin.
Do you import feed wheat as well?
Yes. Today the prices of feed and milling wheat in Ukraine are almost
the same. The difference is just $10 against $50-60 a couple of months
ago. Some two months ago we could import feed wheat at $295-300 per
ton, today, the price is $435-440.
Iran has become one more supplier for us. We are the only company who
imported 12,000 tons of wheat from Iran at the beginning of this year.
The first batch was 4,000-5000 tons of third grade wheat. But when
the batch came it turned out that it was feed wheat. They in Iran
have different grade system. When I saw it I sent my representative
to Iran and he picked the best wheat they had.
How much is Iranian wheat?
The purchase price is $260 per ton. Add transportation costs to and
from Julfa and customs clearance and you will see that it is cheaper
than the Russian one.
Why then aren~Rt flour prices growing?
We expected that flour prices would gradually grow.
Our Government gives high priority to this problem and we are trying
to decide what minimum profitability we can work at. But at some moment
we will no longer be able to work at a loss. We must always have wheat
in stock for producing flour. We are forced to buy wheat at higher
prices, so, perhaps, this month we will fix a price that will ensure
our profitability and ability to import wheat on a constant basis.
10% rise in wheat prices will not have any impact on flour prices.
Flour begins to grow in price from the 15-20% level. We will keep the
flour prices for as long as we can and then we will let them go for as
much as 20%. Generally, flour and bread prices do not fluctuate much.
They try to keep the bread price ~V they even can ~Sblow~T air into
bread but when the price goes up they go back to the initial weight.
We allowed raising flour prices only after the New Year holidays. Only
now we are coming closer to the wheat prices. Today, 50kg of high
grade flour in Armenia costs almost $30 or 10,500-11,000 AMD. First
and second grade flours are 500 AMD and 1,000 AMD cheaper.
What share does the local wheat have in your flour production?
It is so small that it is not even worth mentioning. People gather it
the way they can, mill it the way they can at small flourmills. Since
the arable plots in Armenia are small, the quality of the Armenian
wheat is not equally high. One plot can produce very good wheat while
another one - wheat that can hardly be used as fodder.
Do you import finished flour?
Presently, we are negotiating with a number of organizations. If the
difference between wheat and flour prices becomes big enough we will
consider importing flour. Our key concern is the terms of delivery
rather than the price. We import flour only when we see that our
country needs bread. Besides, each local flourmill employs several
dozens of people. If we import flour they will lose their jobs.
What grades of wheat are imported into Armenia?
We have no clear grade system on the local market. Here we can use the
same wheat for making bread and confectionary. Our company imports
mostly wheat of third grade because if it turns out to be of fourth
grade it will still be milling wheat while if we buy fourth grade
wheat it may prove to be fodder.
Mancho Group produces confectionary as well. Did the rise in egg
prices in late 2010 influence the cost of your confectionary?
By the New Year egg prices grew but then they dropped again. These
fluctuations were caused by changes in the demand-offer ratio. If the
problem was in our hard food the rise in egg prices was quite logical.
Formerly, we bought eggs at 8-10 per egg, today, at 45-50 AMD. If
poultry farms buy food at a price that is 1.5 times higher than before,
the price should grow but it is for farmers to decide for how much.
Today, confectionary business is not very profitable. Confectioners
are just trying to stay afloat.
Can the National Seed Growing Development Program reduce the country~Rs
dependence on wheat import?
One can farm seeds only when one has arable land. Our lands need
amelioration and regular irrigation. You know how much our harvests
depend on rain. Seed wheat is very expensive. If feed wheat costs
over $300 per ton, seed wheat may cost almost $1,000. And you can~Rt
just sow it, you should first prepare the soil.
From: A. Papazian