Flour prices remain high even as the National Milling Com-pany of Guyana (Namilco) alleges that the Trinidad and Tobago National Flour Mill (NFM) is dumping flour on the local market and is contributing to heavy losses and scaled-down production.
Since the flour market opened in July, large quantities of T&T flour have entered Guyana. Namilco Managing Director Bert Sukhai on Thursday told Stabroek News (SN) that NFM is selling flour cheaper to Guyana than it is in T&T. He contends that NFM is selling the Hibiscus brand flour in T&T at US$21 per 45-kg bag, while the same baker’s flour being exported to Guyana is being sold below this. This newspaper has seen a price list from NFM dated May 28, where it shows prices for the said brand moving from close to US$18 in May to US$21 effective June 1. At that time the NFM had said that the rising price of wheat which was said to be 70% of their raw material cost was to blame.
When this newspaper called NFM in Trinidad for a comment on Friday, Market-ing Director Richards Samuels said he could not speak about Namilco’s dumping claims and instead he suggested that SN contact Chief Executive Officer Anthony Joseph. However, SN was unable to reach Joseph.
According to the World Trade Organization, dumping refers to the pricing of exports at a lower level compared to prices of the product in its home market; and often, dumping is intended to drive out competition and to secure a foothold in a foreign market. Sukhai says that this is the strategy NFM is using to capture the Guyana flour market and as a result he believes that his claim of dumping is “very well founded” in the light of the lower cost of the exported flour to Guyana.
The managing director estimated that wheat costs for a 45 kg bag of flour at Namilco is US$24 but it is selling flour at US$25, excluding the value-added tax (VAT) and the true price should be US$30 excluding VAT, to allow them to make a profit.
In the absence of a local Fair Trading Commission Namilco has complained to NFM and to local authorities. Sukhai has written to the management of NFM, namely the Chief Executive Officer, and on the local front to the Ministry of Foreign Affairs and the Guyana Manufacturing and Services Association, in addition to meeting with one importer of NFM flour, DeSinco Trading Limited, about the situation.
In a letter to Joseph, dated October 9, Sukhai stated: “I would hope that this marketing strategy which has the potential to cause major losses to the shareholders of NFM would be addressed by you. We are a multi-national agro based company with mills in over 15 countries and where we have competition, we operate in an environment of mutual respect for each other. We would hope this would prevail with the mills within the Caricom region.” Namilco is a subsidiary of US Company Seaboard Corporation.
Commenting again on the government’s move to open the flour market Sukhai said it was an ad hoc process and the main players lobbying for the market to be open have themselves not imported flour.
Nationalist
Meanwhile, Managing Director of DeSinco Trading Limited, Frank DeAbreu, in explaining his company’s position said that he is a nationalist who believes that the country should produce its own flour but the government opened the market so that the flour prices could decrease. DeAbreu admits that the company is selling flour more than $500 less than Namilco but he said their mark-up is fair and vouches for the quality of the flour.
He noted that DeSinco is not the only company importing from NFM or from the region. DeAbreu said he can guarantee that the prices for flour at DeSinco will remain the same until the end of the year. The Hibiscus brand used to make pastries and similar products is sold for $5,400 VAT inclusive (45 kg) at DeSinco and the national baker’s flour and it retails the national flour at $6,322, also VAT inclusive.
Even though the Hibiscus brand flour is cheaper and the response, DeAbreu said, is good, he is still a minor player since his customers buy from both DeSinco and Namilco. However, consumers are still paying high sums for flour and are not seeing the benefits: one pound of flour is still retailed at $70-$75, an increase from $45 and bread prices are now $200 for regular plait and sliced bread and tennis rolls have also increased from $180 and lower. Except for Pearl’s Bakery, all the major bread brands such as Bakewell have increased their prices. Bread vendors are also complaining about decreasing sales. Nevertheless, DeAbreu is confident that the benefits will trickle down to the consumers eventually.
Future prices
In August, Mahaicony Rice Limited began importing flour from Hummingbird Rice Mills Limited in T&T and provided some competition for Namilco which had increased its prices in July from $4,435 to $5,025 exclusive of VAT. Mahaicony began selling T&T flour at $5,220 VAT inclusive and this eventually led to Namilco lowering its prices to $5,450 VAT inclusive for a 45 kg bag; until it increased it again earlier this month to $6,000 VAT inclusive.
But now DeSinco can source Hibiscus flour from NFM at US$16.90 ($3,450) for a 45 kg bag, according to documents seen by this newspaper, which is causing Namilco much concern as it can sell the brand, suitable for roti and pastries, much cheaper.
Namilco, after increasing prices earlier this month, had also warned of another increase before year end. The company told SN on Thursday that it would like to increase the price of the baker’s flour which is currently cheaper than DeSinco’s baker’s flour. “This is the kind of dilemma I am facing,” Sukhai said, adding that the company is operating at a loss on the 45 kg bag of flour while the government profits from the VAT charged.
It was pointed out as well that across the region, in territories such as Grenada, Barbados and Jamaica, flour prices have increased by 25% to 30% this year, to meet the rising cost of wheat but Namilco is unable to increase prices. “I cannot compete,” says Sukhai, “I can’t afford to dump flour.” He estimates that there has been a 50%-56% increase in the price of wheat since July but this increase is not reflected in the flour price. NFM is looking to aggressively come into the market, but dumping Sukhai says, is against the law and is anti-competitive.
So how big is the impact on Namilco?
During normal plant operations, work takes place five days per week, 24 hours per day. But yesterday 40 factory staffers were sent on one-day forced annual leave, because as Sukhai put it, “there is no work for them.” He said value-added products like roti mix and self rising flour are also affected and if the company’s Thunderbolt flour sales decrease it affects the said products. The availability of wheat middling, a wheat by-product used by stockfeed producers and farmers, has also been affected.
Guyana Stockfeeds Inc Chairman Robert Badal lamented that since July the availability of wheat middling has dropped and the prices have increased from $6 per pound to $10. Apart from this the broken rice used in the feed has also increased from $14 per pound to $20 and rice bran from $6 to $10 per pound, along with the imported corn and soybean meal which jumped by 25%. Badal said there has been a significant increase in the cost of feed and as such the company has increased the price of feed at least twice this year.
Poor weather conditions have affected the wheat crop this year along with the increasing trend of farmers choosing to plant corn for bio-fuels like ethanol instead of wheat. As a result wheat prices have soared worldwide.
