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News • September 05 2004

Price of bread set to soar next month

Karl Schembri

Bakers are warning that prices of bread are set to increase drastically between October and November in the wake of soaring international prices of wheat and the impending liberalisation of prices.
The warning comes at a time when the government is planning to fully liberalise the price of the Maltese loaf (hobz tal-Malti) just a month since its price was raised by 1c.
What particularly angers bakers is the statement by government sources made to The Times last Tuesday that the removal of price control on the Maltese loaf could “lead to a decrease in the price of bread” when everything points towards drastic increases in the costs of raw material.
“The price of wheat is set to increase drastically next month, so we’ll have to increase the price of bread,” says Karmenu Micallef, President of the Bakers’ Cooperative that represents the 175 licensed bakers.
“The government doesn’t want to shoulder the decision to raise the prices, it knows it will be unpopular and there’s no way it is going to raise the price yet again. That’s why it is now talking about the liberalisation of prices, so that we will be forced to raise the price ourselves.
“Far from lowering prices, we are going to have no other choice than to raise them. I have no doubt that the government is about to liberalise the price of bread in the coming days.”
Joe Portelli, secretary of the bakers’ cooperative, also expressed his surprise at the announcement by government sources to The Times.
“It’s true that when we met the minister a couple of weeks ago he hinted that it was about time to liberalise the price of bread, but there was no announcement to that effect.
“I would be surprised if government had to do that at such a critical moment, when the price of flour is going to rise because it is no longer subsidised.”

The Maltese loaf has been part of the staple diet of the Maltese for centuries but price liberalisation could make other varieties more attractive.
The worker on his way to work with a large warm loaf, penknife in hand and a mixture of tomatoes, onions, oil and olives is no longer a common sight, but most Maltese bars still offer the sliced loaf filled with a variety of fillings.
If what the bakers are claiming turns out to be correct, the popularity of the loaf, which features in most Maltese recipe books, may further suffer as prices rise.
While the government says that liberalisation “could lead to a decrease in the price of bread,” bakers – who spend their nights baking bread - insist that would be impossible, especially in view of the soaring prices of their raw material.
“How can we lower prices when the prices of raw material are soaring? It’s dishonest to say so,” Portelli said.
“If the government really has the public interest at heart, it wouldn’t liberalise prices at such a critical moment, when it is going to hit people hard, particularly the poor, in such a harsh way.
“Liberalisation should only happen when there’s stability, when things are calm, unless you don’t mind shocking everyone. It’s not the time to do so.”
The government’s statement appears even more deceitful when one considers that the only price control binding bakers is limited to the maximum price for every loaf. In fact, individual bakers can decide to lower their prices but the government will only stop them from raising them above the stipulated maximum 17c. And yet, none of the bakeries sell loaves for less than 17c, given the narrow profit margins.
“Nobody is in a position to lower prices even though we technically can do it,” Micallef says. “We’re very far from the realistic price. There might be some giant bakeries that will lower their prices in a bid to destroy everybody else, but once they dominate the market nobody will stop them from raising prices sky-high, m’oghla Gesu Kristu.”
Since subsidies were removed in 2000, wheat started being processed by Federated Mills instead of by government-owned Medigrain.
Government used to absorb all the fluctuations in the international prices of wheat, much as it used to do with oil.
The subsidy mechanism provided a buffer zone of sorts thanks to a stable price of wheat for Malta’s economy of scale, whereby government would make good for price hikes in wheat and deposit any profits into a special fund to finance the venture whenever international prices went down.

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Now, 85 years since the Sette Giugno riots that had erupted in the wake of soaring prices of bread amid post-war economic depression, it seems that the removal of subsidies are going to hit hard the Maltese consumers who are so used to their traditional bread.
“If the government really believes that bread is essential for everyone, including the poor, how could it do away with subsidising wheat?
“Don’t tell me it’s because of Europe because it could have negotiated for a derogation. The only exemption it got was to waiver new levies on US-imported wheat until 2010, which is essential for the Maltese hobza. But it didn’t get any concessions to keep the wheat prices stable. Other countries do have such arrangements for their essential raw materials.”
Last month’s price increase was triggered by a 56c rise on the price of every sack of soft wheat, which comprises 30 per cent of the flour used for the Maltese loaf. Bakers say the next price increase will be even worse given that it will affect hard wheat, which comprises 70 per cent of wheat used for every loaf, and its price is set to go by up to Lm2 for every sack.
“With a 56c rise on wheat, we didn’t witness any great shocks, but the upcoming price hike is something else altogether,” Micallef said. “Wheat importers know this; the government knows this and acknowledges it in private.”
Micallef says that a realistic price that would reflect the present costs to produce a loaf would be in the region of 20c, that is 3c more than the present price.
“The present prices still do not reflect the costs to produce bread,” Micallef says. “We’re not making losses only because we make arrangements to the weight of bread. It’s inevitable.”
The “arrangements” he refers to amount to the downright tampering with the weight of the hobza, with some bakers selling 300g loaves or even less for the price of 400g. It’s a known secret to which the government turns a blind eye and which Micallef himself acknowledges, although he adds that he hates “having to do it.”
“This shouldn’t be happening,” Portelli interjects. “We’re deceiving customers but it’s the only ‘adjustments’ we can make to make a profit. We can’t increase prices, and yet we’re absorbing all the increases to the cost of living, increasing running expenses and everything else.”
Micallef added: “Customers do not look much at the weight as much as at the price. People stopped buying bread when there were price hikes, the market backed out. “We’ve already witnessed some shocks when bread was raised from 11c to 16c. People are buying less bread; just look around you to see whether anyone still leaves stale loaves hanging outside their doors for the rubbish collectors to take to feed rabbits.
“You won’t find anymore because people are buying much less bread. Today, the only people who throw away stale bread are the bakers themselves, who remain with shelf-loads of unsold loaves in their bakeries.”
Apart from the rise in the prices of raw material, bakers complain of increased expenses they are incurring to comply with new regulations.
“The new regulations are ruining us,” says Ray Briffa, the vice-president of the cooperative. “New regulations keep cropping up, most of them useless when it comes to the quality of our bread, but very expensive for us to implement.”
According to new regulations, raw materials have to be stored in separate rooms, the working area has to be in a section of its own, and the same applies for the despatch area.
“We also have to open a changing room for employees,” Micallef said. “Can you imagine that in the tiny old bakeries? So we can play a requiem for the old bakeries. I wonder whether these are EU regulations… I just think we want to be more Catholic than the Pope.”
Portelli said: “We have to be realistic. When the loaf is ready there is no chance that you’ll find a microbe in it, after a bake of 280 degrees Celsius. How many cases of food poisoning by bread have we have? None. It’s unheard of.”
Alternattiva Demokratika has already slammed the government’s plans.
“Liberalisation is likely to result in an increase in the price of the hobza which will have a severe effect on families with low to medium-low incomes,” said AD’s spokesman on the economy and tourism, Edward Fenech. “A fully liberalised market can only make sense when Maltese workers get decent European salaries which improve their spending power.”






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