AZE.US
Bread and flour prices in Azerbaijan could increase despite a stronger domestic grain harvest, as higher transportation, energy and labor costs continue to pressure producers.
Harvesting has been completed across 86% of the country’s winter grain fields. Farmers have collected more than 2.87 million metric tons of grain from 827,625 hectares.
Average yields reached 3.48 metric tons per hectare, up 0.17 tons from the same period last year.
Economist Khalid Karimli said higher yields reduce production costs. A 5% increase in productivity could lower the cost of producing each unit by at least the same amount.
That does not mean bread and flour will automatically become cheaper. Under current market conditions, farmers and producers are more likely to benefit through higher profit margins.
The main reason is Azerbaijan’s heavy dependence on imported food-grade wheat. Domestic production covers only about 25% of demand, while the remaining 75% comes from Russia, Kazakhstan and other countries.
The national harvest figures also include barley and lower-grade wheat used as animal feed. As a result, an increase in total grain production does not necessarily translate into a comparable rise in the supply of wheat suitable for bread production.
“Wheat prices are largely determined by the international market,” Karimli said. “If Russian or Kazakh wheat is imported at a certain price, locally produced wheat will not be priced significantly lower.”
Wheat itself accounts for only about half of the final production cost of bread and flour products. Processing, packaging, transportation, wages, utilities and energy make up the rest.
Even if wheat prices decline by 5%, the total cost of the final product may fall by only 1% to 2%. That reduction could be completely offset by higher logistics, energy and labor expenses.
Karimli said inflation and Azerbaijan’s reliance on imported wheat make a meaningful price decline unlikely. If other production costs continue to rise, bread and flour products could become more expensive even after a relatively strong harvest.
AZE.US