Managing director of ADM/Jamaica Flour (JF) Mills Derrick Nembhard is being cautious about forecasting a price increase for flour in the coming weeks, but he is not ruling out the possibility of a rise in the cost of the product.
While the war in Eastern Europe between Russia and Ukraine has disrupted the supply of wheat in the global market, Nembhard informed the Jamaica Observer, “There are a number of other factors affecting the price of raw wheat.”
“There are myriad things that will affect the price and it will be hard for us to say what the price will be in six to eight weeks’ time, but the general trend is that prices have increased,” he added.
One such factor has been the weather, as an early and extended winter season in the United States has delayed planting in a number of areas in the US, which is one of two suppliers of wheat to Jamaica. The flour mill also gets wheat from Canada.
“This will affect the price of the type of wheat we use here in Jamaica,” Nembhard explained.
On the bright side, however, he said that, since Jamaica’s suppliers were located in North America, the country is guaranteed supplies of wheat. Conversely, other countries which previously depended on the supply of wheat from Russia and Ukraine have had to resort to suppliers in North America and South America.
Added to this, countries like Moldova, Serbia, and Kazakhstan have introduced export bans and quotas on wheat and other grains, resulting in a shift from European producers to the Americas.
When asked if ADM/JF Mills had considered purchasing from wheat producers in South America, the managing director reiterated that the company was guaranteed a supply of wheat by staying with its current suppliers. Furthermore, he pointed out that the company could risk losing out on wheat by joining a bottleneck of purchasers who are now looking to the South American market.
Moreover, Nembhard said that raw material is of a lesser concern as the cost of loading ships and transporting wheat has risen significantly. While ADM/JF Mills has contracted shipping companies and, by extension, secured berthing terminals, Nembhard outlined, “It costs you to load or elevate into a vessel. Plus fuel has gone up, so freight rates have gone up.”
He added that operation costs at shipping companies had also risen, and so the mill had to absorb or pass on costs.
Though Nembhard could not provide exact figures to indicate the uptick in shipping cost, he said a number of variables are considered when transporting wheat from the US.
“It varies from boat to boat and it depends on the size, it depends on how many products that you’re putting on the boat. We here [in Jamaica] use three different types of wheat and therefore we’ll have three different loadings,” he explained.
“There’s an additional charge for switching a vessel [and] from product to product, so it’s difficult to say that it has gone up by this amount,” he continued.
Another factor, he pointed out, was the price of fertiliser. In addition to supplying wheat and other grains to the world market, Russia and Ukraine are also producers of fertilisers, the price of which has increased since the war began in February.
With fertiliser costs now on an upward trajectory, Nembhard argued that farmers who are faced with a choice of planting crops that need less fertiliser than wheat, such as soybean, may consider the option. Again, such a move, he said, could shorten the supply of wheat and catalyse a price increase.
Still, he said that the company has taken advatage of buying futures and as such benefited from lower-cost wheat when indications of the price increases arose.