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High wheat cost hurts Malaysia industry-trade

KUALA LUMPUR: High wheat prices have prompted Malaysian millers to cut grain imports and produce less flour, in turn pushing up bread prices and squeezing bakers, industry sources and press reports said on Wednesday.

Bakeries in most parts of Malaysia have raised prices of bread by between five and 10 percent since Tuesday owing to a shortage of flour, The Star newspaper said.

But the move has run into strong opposition in light of the nation's anti-inflation drive.

Domestic Trade and Consumer Affairs Minister Abu Hassan Omar warned on Tuesday that flour was a controlled item and the government had yet to approve any price increase.

But industry sources said an overall rise in prices was necessary for the survival of both millers and bakers.

"The wheat price is just too high now", said the sales manager of a flour mill. "Millers are adopting a wait-and-see attitude before importing more material and this is squeezing supply to bakeries".

Unless an all-round price increase is allowed, there will be not be an easy solution", he added.

Price of "A" grade wheat had jumped 75 percent from between 550-560 ringgit ($220-$224) per metric tonne in the central region on April 24 to 970 ringgit ($388) on May 28, industry sources said.

A 25 kilogram bag of flour currently costs between 20 and 21 ringgit, they said.

The Star newspaper quoted two bakery managers as saying they may have to close temporarily.

Victory Ananda Bakery manager Prem Kumar said his supply of flour had dropped from 700 to 300 bags and he may have to wind operations if the situation worsened.

Thong Aik Bakery and Biscuit owner Lim Tau Nam said the factory had cut down the size of its cakes and may close next week if it did not receive fresh supplies of flour.

Minister Abu Hassan said on Tuesday that Malaysia could import flour from China if the situation worsened. However, traders were sceptical about the idea, saying the quality of the material may be inferior.

"Flour from China, as far as I know, is very inferior in quality to that of Malaysian flour. It may be slightly cheaper but it's also slightly off-colour and may not be suitable", a senior official at a flour mill told Reuters.

"Also by importing flour from China, we'll be hurting local millers further", said the official.

Malaysia's annual consumption of wheat is estimated at around 800,000 tonnes. There was no available estimate on production and demand of flour.-Reuter