The Department of Trade and Industry (DTI) has been closely monitoring the declining trend in world market price of wheat since June 2011 based on the Minneapolis Grain Exchange (MGEX) data.
The DTI now takes note that despite this declining trend in world market price of wheat, the monitored retail prices of local brands of flour, instant noodles, and bread do not reflect such decline, which could have been part of their raw material costs.
These observations have prompted the DTI to look into why the prices of flour, instant noodles, and bread in the local market are not decreasing.
DTI-Consumer Protection Group Undersecretary Victorio Mario Dimagiba explains, “When prices move up or down in the world market, retail prices in the domestic marketplace naturally move with it.”
“With sharp declines in the world market price of wheat, we were expecting lower retail prices for flour which in turn, results to lower prices of bread and noodles. However, based on our regular monitoring, prices of said commodities are not going down.
“As such, we cannot help but wonder if some form of ‘teaming up’ is happening within the industry, which can be influencing the current situation.”
Confirming DTI’s observation on the decreasing world price behavior is the latest National Economic and Development Authority (NEDA) report that the value of importation of raw materials decreased by 6.2 percent which can be attributed to the declining prices of raw materials in the world market.
Since June 2011, the percentage decline in world market price of wheat totalled to 63.19 percent.
But the monitored prevailing prices for flour remained at a range of P850 to P940 per 25-kg bag; P6.30 to P7.10 for noodles; and P36.50 to P59.50 for branded tasty or loaf bread.
“Considering the decline in world prices, the DTI computation reveals that the retail prices of flour should be P715 to P839 per 25kg bag for Class I flour; P732 to P825 per 25kg bag for Class II flour; and P800 to P845 per 25kg bag for premium flour.
“Therefore, prices of all loaf bread must decrease by P0.56 to P1.38 per 450g pack and P0.75 to P1.83 per 600g pack; P0.30 to P0.60 per 250g 10-piece pack for pan de sal; and P0.26 to P0.34 for noodles,” Undersecretary Dimagiba specifies.
Last May 15, the DTI wrote separate letters to 11 local flour millers and three baking associations to request them to lower their prices.
There was only one reply from Liberty Flour Mills Inc. senior vice president Ms. Sandra Uy who responded that the request will have to be discussed by the higher management.
On June 1, Undersecretary Dimagiba’s office issued a second letter, this time to 16 flour millers and 12 bakers.
“We reiterated the DTI’s stance that they should recognize passing on the benefit of lower wheat prices by lowering prices of flour that will translate to lower bread prices,” Dimagiba stressed.
To further its probing, the DTI has coordinated with the Bureau of Customs and requested for the flour millers’ 2014 import documents, which include import entry declaration, Bill of Lading, and commercial invoice.
In addition to these letters, the DTI has undertaken another course of action to ensure that prices of goods, particularly flour, noodles, and bread are sold at reasonable prices that are reflective of world market price behavior.
“The National Bureau of Investigation (NBI) is already investigating possible cases of profiteering involving two big flour millers in the country for relentlessly maintaining high prices over the past three-and-a-half years,” Dimagiba underscored.
The DTI’s price monitoring reports show that these big flour millers, despite the decline in prices of wheat in the world market, are constantly selling their flour bags at P930-P940, which is significantly higher than the prevailing price of P900.
Undersecretary Dimagiba added, “We also requested the NBI to expand its investigation and include all flour millers and bakers in the possible cases of profiteering.”
Prior to seeking NBI’s assistance, the DTI has already been coordinating with manufacturers of basic and prime goods since the start of the year to request a review and possible decrease in prices. Milk and coffee manufacturers heeded to this request but the rest remained adamant.
Meanwhile, a baker’s response to DTI’s call for lower bread prices is by increasing the weight of pan de sal by 5 grams.
The baker confirmed to DTI that the cost of raw materials indeed declined and that the cheaper alternative flour that the baking industry has been testing is already acceptable for making Pinoy Tasty and Pinoy Pan de sal. However, other bakers claim that said alternative flour is still unacceptable.
Dimagiba said, “The Department maintains its close coordination with manufacturers and retailers on their product prices and supply yet we would like to emphasize to them that the DTI has ample and reliable data that it relies on, which can show if price adjustments are necessary.
We remain firm on our request to them, particularly to the flour, instant noodles, and bread industries: review your prices and adjust accordingly.”