Over the weekend, the Ministry of Domestic Trade made official the trust to ensure the price of flour and noodles and received representatives of the industry on Monday to operationalize its compliance within the products of the Care Prices program. The measure is in response to the concern generated by the impact of the international rise in wheat on the local price of bread and the need to reinforce decoupling mechanisms to stabilize food prices at the local level.
The meeting was scheduled by the Undersecretary for Internal Market Policies Antonio Armando Mezmezian. ASU, fideereos and millers attended to operationalize the trust and start discussing the next stage of careful prices. “Twenty days ago we agreed with the bakers and millers on the price of a kilo of French bread in a range of 220 pesos to 260 pesos per kilo with a bag of flour at 1,300 pesos. That agreement is breaking down,” said the Secretary of Domestic Trade. Roberto Feletti on AM 750 radio, who was at the beginning of the meeting and then left Mezmezian in charge.
through the Joint Resolution 3/2022 published in the Official Gazette, Agriculture and Productive Development made official on Saturday the creation of the trust that subsidizes the price of wheat for the domestic market. It will be valid until January 31, 2024 and includes 800,000 tons for local consumption. Establishes reference prices for basic foods such as dry noodles and flour through the Caring Prices program. In the resolution, the ministries detail that “it must ensure the general economic interest of the population, through an Internal System of Financial Assistance that, preserving market freedom and free competition, guarantees internal supply and ensures fair and reasonable prices for the consumers”.
Wheat increased 60 percent in the Chicago Market last week and closed at 495.31 dollars per ton, a historical record and with a direct impact on the domestic market for both cereal and derived products, such as flour. However, the wheat trust that became official only establishes a reference price for two products: 000 flour and dry noodles that participate in Care Prices. It does not establish regulations for the increase in prices of the wholesale bag of flour by which the industry is supplied.
Several actors in the sector reject the mechanism, and above all after learning about the annex to the resolution, which establishes the price of wheat in the trust at 23,000 pesos the ton. The official dollar is 176 dollars a ton against the almost 500 dollars in which it closed in the Chicago Market and the 34,180 pesos that were paid in Rosario.
It is a scheme of cross subsidies between private by which part of the income received by exporters, benefited by the increase in world prices, is used to subsidize the price of those who sell in the domestic market and do not benefit from international increases.
The State monitors and regulates this agreement to guarantee the supply at affordable prices of 800 thousand tons of wheat to produce the dry noodles and flour 000 that are within the +Care Prices program.
The instrument will mainly benefit companies producing these two specific products. According to the official text, “all those Suppliers of Products Subject to Compensation who are in the Care Price Program that adhere to the Trust subject to compliance with the requirements to be so” benefit.
The Government has the precedent that this tool was successfully applied in early 2020 for sunflower oil. In the case of mixed oil, the model worked in terms of prices and for the producer because the subsidy to maintain the domestic market price is barely 1.9 percent, much less than traditional withholdings.