Don't count on cheaper bread
While wheat prices fell 34 percent between March, 2008, and March this year, the price of a 700g loaf of white bread went up 23 percent while a loaf of brown bread went up 25 percent.
Supermarkets being investigated by the Competition Commission (for alleged price-fixing) pointed to their suppliers for an explanation.
Premier Foods, which manufactures and distributes Blue Ribbon bread, and economists say bread suppliers are recouping costs from a time when wheat prices rocketed between 2006 and 2008.
They also blame rising labour and electricity costs for the fact that, although the bread price has been stable since March and in some cases has fallen, on the whole prices have not followed, plummeting wheat prices downwards.
According to National Chamber of Milling chief executive Jannie de Villiers and Andre Jooste, an economist at the National Agricultural Marketing Council, there is a lag in the retail price of bread relative to wheat: when the cost of wheat goes up or down, bread prices follow about three to four months later.
But it has been 15 months since wheat costs last peaked, with no significant drop being seen in the bread price.
Jooste said bread manufacturers were recouping costs from a period when wheat and fuel costs had increased significantly while the bread price had lagged.
De Villiers said millers and bakeries could be “building up reserves for when costs go up again”.
Because of this, he said, the companies needed to be watched in case they boosted their bread prices along with increases in input costs.
He said wheat, electricity, transport and labour dominated the cost of bread.
Labour costs in the first three months of this year were up 18 percent on last year.
Private transport costs, including trucks, had fallen 16 percent in the past 12 months.
“What is happening in the market now is the bread industry is doing a bit of catch-up,” said de Villiers.
Competition Commission deputy commissioner Tembinkosi Bonakele warned Parliament this week of price-fixing and abuse of power along the food chain.
The commission is investigating Spar, Pick n Pay, Woolworths and Shoprite.
Tiger Brands, Premier Foods and Foodcorp have all admitted guilt and settled. The hearing on Pioneer Foods had been completed and final arguments would be heard in September, Bonakele said.
By Craig McKune