Bread Prices in the EU May Increase As Production Costs Soar

Wheat

Netherlands

Published Oct 13, 2022

The euro depreciation against the US dollar will place a disadvantage when importing into the EU. In addition, the cost of electricity and natural gas in the EU has increased even further since Russia cut off its supply to the EU. Decreased supply of both imported and domestic wheat and rising energy costs have caused increases in bread prices in the EU.

According to the European Commission, the value of wheat imported into the EU rose by 20% YoY to USD 841 million, but the volume decreased by 69% YoY to 2.09 million mt in the first seven months of 2022. The majority of cereal purchases are conducted in US dollars. The EU is at a disadvantage in importing commodities due to the euro's depreciation against the US dollar. The currency fluctuation will affect the grains industry as the euro depreciation outlook remains unclear.

Products derived from wheat such as bread as important staple foods have become significantly more costly. This is particularly due to the Russia - Ukraine war, which has disrupted global markets since Russia and Ukraine are both key players in grains, wheat flour, fertilizers, and energy exports. The representatives of Russia, Turkiye, Ukraine, and the UN has signed a contract to allow for the transport of Ukrainian grain, food, and fertilizers across the Black Sea from three ports, including Odesa. However, the logistic still has not been back to pre-war levels.

Source: European Commission

The average bread price in the EU in August 2022 was 18% higher than in August 2021. This is a significant increase compared to August 2021, when the average increase in bread prices from August 2020 to August 2021 was 2.7%. The EU also pays a high price for its reliance on Russian gas, since the EU's energy costs soar when Russia's supply is cut off. In addition, India's restrictions on wheat flour exports to control domestic prices have worsened the situation of the global supply of wheat flour.

Due to a lack of supply, wheat flour prices have steadily risen across the EU. The increasing prices are noteworthy as bread is a staple food across Europe. Tridge’s wholesale price data for wheat flour in Poland increased by 13% MoM to USD 0.73/kg in the last week of September. Compared to the same period in the previous year, the price of Polish wheat flour surged by 24% YoY. Since Russia cut off energy to the EU, the cost of electricity and natural gas for the ovens, used for baking bread has climbed even further. Some bakeries in the EU may be compelled to raise their bread prices in the coming months to maintain their profit margins due to the rapid increase in raw materials and energy prices.