“War on inflation”: they say that government measures will not bring down the price of bread

Following announcements by the Government of measures to stop the rise in the price of bread, industry analysts say that it “could in the short term be maintained or stabilized, but I don't think it will go down”. This was assured to the media by the economist of the Agricultural Foundation for the Development of Argentina (FADA), Natalia Ariño. In addition, the milling SMEs said that when policies such as the current ones were applied, consumers did not benefit from them.

The Government, faced with the increase in the international price of wheat due to Russia's attack on Ukraine, pushed until 31 December this year an increase in withholdings on soy by-products, such as oil, flour, and biodiesel. With the additional money raised by the measure, the “Argentine Wheat Stabilizing Fund” was created. This is an administrative and financial trust that will have the objective of “stabilizing the cost of a ton” of this cereal “that mills buy” nationwide. It will be in charge of the Ministry of Internal Trade, led by Roberto Feletti.

“Beyond wheat and flour, there are other components that affect the final price of bread,” Ariño said. These are related to production costs, such as rents, wages, freight, and taxes, among others. “All this is impacted by the inflation we have in our country. In addition, it must be borne in mind that at this time of year, all these items are updated,” added the economist.

In addition, he argued that the price of bread that reaches the consumer does not depend solely on the value of wheat and flour, where for example cereal represents 13% of the final value of bread. And if the price of wheat rises by 40%, the rise in bread would be 5%, which is equivalent to five weeks of inflation. “The measures being implemented by the Government are for a specific sector, but Argentina has a much more serious problem, which is inflation that is immersed in food, but also in other sectors,” said Ariño.

On the other hand, Natalia Ariño warned that official interventions in agricultural markets cause “uncertainty and mistrust” in the sector. And in the specific case of wheat, in view of the sowing of the new campaign that will begin in late April and early May, the producer at the time of making decisions will consider government measures, in a context of rising costs, such as agrochemicals and fertilizers, and the climate situation, with productive areas still affected by the drought.

Ariño's opinion was joined by the granary market analyst, Javier Buján. In dialogue with Infobae, he recalled that these measures had already been implemented in the past and did not benefit any sector. “The price of bread is not going to go down. The Government is not on the right track to lower current inflation levels. Intervention in markets causes serious damage to food producers and consumers. In 1943 Perón did the same, and between that year and 1955 inflation was 448% with control measures.”

Another sector consulted by Infobae on the impact of government announcements in recent hours is milling. The president of the Federation of the Milling Industry, Diego Cifarelli, said that the entity is in conversation with national officials to have more details on how the wheat price stabilizing fund will work. He also said that they presented projects for the fund to be applied directly to consumption. “The Government wants to apply it to all flours to decouple not only bread from the volatility of the price of external wheat,” the leader added.

In turn, regarding the price of bread, Cifarelli said that “when the stabilizing fund starts to operate, it will generate peace of mind in the price alteration depending on what impacts wheat. We always say that wheat and flour have very little impact on the formation of farinaceans. And for the future we are not going to hear that such a thing increases because flour increased, because prices are going to fall back.”

Finally, Oscar Marino, head of the Association of Small and Medium Milling Industries of the Argentine Republic (APYMIMRA), said in dialogue with the media that “predicting what will happen to the price of bread is very difficult. On previous occasions when this type of mechanism was applied, the truth was that the consumer did not reach it. There was not the $2.50 bread proposed at that time by the Secretary of Commerce. The measures that are useful are those that we proposed, that instead of subsidizing milling, it had to be done directly to consumption, in the most vulnerable sectors, through cards that are already in force or some other that could be created”.

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