The Georgian government has decided to withdraw from wheat flour subsidy program, which has been in effect since December 2021 and ended in late June.
Given that the new wheat harvest is expected both domestically and in major exporting countries, the Georgian government has considered that it is a good time to exit subsidies, as wheat flour price has a downward tend, but the fact is that bakeries will not keep price unchanged without subsidies.
At present, 50 kg first-grade non-subsidized flour costs 62 GEL, which exceeds the cost of subsidized flour by 9 GEL.
"Bakeries already receive first-grade 50-kg flour at 62 GEL, so the difference is 9 GEL compared to the subsidized price. As far as I know, the prices of bread will be revised, I cannot say for sure, but the producers will increase the price by about 10-15 tetri," - said Lado Bidzinashvili, director of bakery "Baraka".
As for the forecast of the future price of flour, the private sector has no answer, because it is not yet known what the so-called starting price for wheat will be.
As of today, the price of 1 t of wheat ranges up to $ 180. Last year, the figure was around $ 200, so at this time businesses have no expectation that the price of wheat on the international market will approach last year's rate.
"Wheat is $ 15-20 cheaper today, but due to the fact that Russia has a floating export tax from June 1, we do not know how much it will be in the next week. We have expectations, that the price will decrease, but it is difficult to predict how much,” said Lado Bidzinashvili.
It is expected that from this month, the bread factories will individually decide what the price of the bread they produce will be in terms of unsubsidized flour. As the bakers say in private conversations, the factories still have stocks of subsidized flour, so it is unknown at this stage when and how much bread will become more expensive for consumers.
According to the Deputy Minister of Agriculture, government spent 15-16 million GEL from the state budget on wheat four subsidy program for 7 months.
The Deputy Minister of Agriculture Gela Khanishvili does not think that the price of bread will increase radically, as there is an expectation that prices on the flour market will stabilize.
"As you know wheat harvesting is started in Georgia and worldwide. Record volume of wheat four harvest is expected in Russia, Ukraine, as well as in Europe, this has resulted a decline in wheat prices. If a few days ago wheat four price has been 70 GEL, it has decreased to 65 GEL and now it costs 58 GEL. We expect the flour market to stabilize, which will help determine the real pricing policy for bakeries.
In the free market conditions, there was no sharp price increase, moreover individual bakeries did not raise the bread price at all. In this case, we expect that the price of bread will increase within certain limits and there will be no sharp rise in prices, "- said Gela Khanishvili.
