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(photo credit: Ariel Jerozolimski)
Prices of regulated breads are poised to be raised by at least 11 percent, the second increase in three months, in response to the worldwide wheat crisis and resulting hike in flour prices, which is putting pressure on production costs of the country's bakery owners.
"Since the last time bread prices were raised three months ago, wheat prices worldwide have doubled and flour prices have risen by 100%," Yochanan Aharonson of Davidovich Bakery & Sons Ltd., who is also acting as the bakers' representative in talks with the government, told The Jerusalem Post Tuesday. "In response to this situation, bread prices need to be adjusted by at least 11% to make up for the continued sharp rise in world flour prices."
As the representative of the bakery owners, Aharonson has presented the Industry, Trade and Labor Ministry with a deal proposal that would include raising price-controlled breads by 11%. In exchange, flour mills would agree to freeze prices for a period of 10 months instead of modifying prices every couple of months.
"Officials at the Industry, Trade and Labor Ministry seemed to have been fine with our proposal to raise prices by 11% but Zvia Dori, supervisor of prices at the ministry wants to go by the book," said Aharonson.
According to the controlled prices regulation customary in Israel, bread prices must be updated whenever a 3% increase in world wheat prices is evident. At press time, Dori and economists of the Industry, Trade and Labor Ministry were still evaluating the bakeries' proposal and discussions over how much to raise the prices of regulated breads were ongoing.
Even if the prices of regulated breads were to be raised by the requested 11%, Aharonson said it still would not cover production costs.
"Flour makes up 27% in the production of price-regulated breads and as such prices should be raised by 27%," said Aharonson. "In theory, bread prices should be raised in the same manner as gas prices are being raised in this country when energy prices are soaring."
Aharonson added, however, that because of the social and political sensitivity surrounding bread prices, the process was more complex in practice.
Back in July, the government approved recommendations made by a special committee entrusted with resolving the "bread crisis" to raise prices of common white and dark bread by 12.5%. At the same time the cabinet voted to end price supervision on such bread as of January 1, 2008.
Prior to July's decision, bakeries had shut down their production of price-controlled breads, which include plain white and dark bread - sliced and unsliced - as well as halla baked for Shabbat.
Wheat has risen some 70% this year and reached a record $9.6175 on September 28. On Tuesday, it was at $8.49 a bushel.
Demand for US wheat rose this marketing year as global inventories declined and adverse weather conditions hurt crops. Dry weather damaged plants in Canada and Australia, expected by the US government to be the second-biggest exporters of the grain. Excessive moisture curbed yields in the US, the largest exporter, and in France and Germany.
Meanwhile, the USDA said last month that global supplies are expected to fall to 112.4 million tons by the end of the marketing year on May 31, the lowest since 1982, the USDA. The department is scheduled to release another estimate on October 12.
Bloomberg contributed to this report.