Wheat prices climb after forex shock

Consumers are facing a double whammy as prices of wheat began to rise due to the soaring price of US dollars as well as an increase in its price in the international market at a time when rice prices are also trending upwards.

Rice and grain are essential commodities, so the increasing price of both may have a pronounced impact on consumers.

According to the Trading Corporation of Bangladesh, rice prices have increased by 2 percent to 5.61 percent over the past month while the price of wheat, the second most-consumed grain in the nation, saw prices per kilogramme (kg) increase by 9.20 percent to 14.29 percent in the same period.

While Bangladesh can meet the lion's share of its demand for rice locally, the nation has to depend largely on the global market to meet its domestic requirements for wheat. Bangladesh's annual demand for wheat is 70-75 lakh tonnes, 85 per cent of which is met through imports, according to industry insiders.

Taslim Shahriar, senior assistant general manager at Meghna Group of Industries, one of the biggest commodity importers and processors, said the price of wheat had been increasing due to an increase in the price of US dollars due to the prevailing forex crisis.

Bangladesh had $33.4 billion in its forex reserves at the end of fiscal 2021-22 but saw that figure plummet to $21.05 billion on October 5, data from the central bank showed. It was about $40.7 billion in August 2021.

Recent data also shows that the local currency, taka, has depreciated by about 28 percent since January last year due to higher foreign currency outflow and lower inflow.

Yesterday, consumers in Dhaka and Chattogram were paying about Tk 48-50 per kg of wheat compared to Tk 42-45 a month ago, according to data gathered from five kitchen markets across two cities.

Ashraful Islam, a retailer at Al Amin Store in Karwan Bazar, one of the largest kitchen markets in the capital, said they sold loose flour at Tk 48-50 per kg yesterday.

He added that a 2 kg branded packet of flour cost Tk 100 a month ago but is now being sold for Tk 120.

In wholesale markets in Dhaka and Chattogram, traders said that the price of the essential had increased by Tk 300-320 per 50 kg sack in the span of a month.

Abul Hossain, a wholesaler at Laksam store in the capital's Karwan Bazar, said he sold each sack (50 kg) of flour at Tk 2,200 yesterday, up from Tk 1,880 a month ago.

"We have to buy it at an increased price, so I am selling it at a higher price. But products are available as per demand. The millers say the price is increasing as there is a shortage of wheat in the market."

Another wholesaler in Chattogram made similar comments.

Apart from that, the price of wheat has also increased in the international market due to the end of the harvesting season and increased shipping costs, Shariar of Meghna Group of Industries added.

He said if imports were not in line with demand, it would have an impact on the market, adding that efforts were being made to import as per demand.

At present, they are buying normal quality wheat from Argentina, Russia and Romania for $290 to $300 per tonne, and premium quality wheat from Canada for more than $360 per tonne, he added.

He said he was buying normal quality wheat at $280 to $290 per tonne a month ago, but added that the price of premium quality wheat had come down from $380 a month ago.

However, these figures could not be independently verified by The Daily Star.

Another importer, on condition of anonymity, said that he was being charged Tk 125 for each US dollar compared to Tk 115 to 116 a month ago due to the prevailing forex reserve crisis.

As of November, gross foreign reserves stood at $19.5 billion, down about 15.7 percent over the past three months. The dollar stockpile is sufficient to cover import bills of a little over three months, as per the latest data published by Bangladesh Bank.

Another factor is that wheat cannot be imported as per demand due to an inability to open letters of credit (LCs) on time. Besides, prices are increasing in the international market, said Md Aminul Islam, managing director of Nabil Group, one of the largest importers of wheat.

"We need 3-3.5 lakh tonnes of wheat every month, but we have only been able to import about 2.5 lakh tonnes," he said.

"Besides, the weather in Russia is very bad now. For this reason, wheat is not being shipped on time. So, wheat cannot be timely imported as per demand in the local market," he added.

On the other hand, the price of wheat has increased by $20-25 per tonne in the international market over the past few days, he said.

In August, the freight charge for each tonne of wheat was $38, which has now increased to around $55 to $62, he added.

According to data of the food ministry, 38.75 lakh tonnes of wheat was imported at the government and private level in fiscal year 2022-23.

In the first five months of the current fiscal year (up to November 27) import of wheat stood at 18.87 lakh tonnes.

Importers estimate that around 45 to 48 lakh tonnes of wheat may be imported by the end of the current financial year.

According to data of the Bangladesh Bureau of Statistics, food inflation stood at 12.56 percent in October this year, the highest in at least a decade. Meanwhile, non-food inflation advanced 48 basis points to 8.3 percent last month.