Iraqi flour prices triple on wheat import shortages

Companies fail to deliver wheat; government officials say shortage temporary; Iraq one of the world's biggest wheat importers

Iraq's flour prices have tripled over the last two months because of shortages in imported wheat supplies, threatening to push up food prices that have already stirred protests in some poorer parts of the country.

Iraq is one of the world's largest wheat importers and much of the government's budget is spent on a food ration programme that supplies 60 percent of Iraqis. Merchants and traders said prices had spiked as officials had been unable to supply flour.

"When there is no flour in food rations for a month, market prices go up as people need this important staple and will continue to buy it," said Mustafa Kadhim, 30, a flour merchant in the main wholesale market in eastern Baghdad.

Global food prices hit their highest level on record in January, contributing to turmoil in other countries already facing high unemployment and poverty. Wheat prices on Thursday hit their highest level in two and a half years. [ID:nSGE71203E]

In Baghdad markets, a 50-kilogram sack of flour which sold at 10,000 Iraqi dinars, or $8.50, two months ago, now sells for 30,000 dinars, or $26, a bag, according to local merchants.

Government officials say price increases are temporary because they have local wheat in stock and are waiting for the arrival of imported wheat from the ports and from overseas to mix with Iraqi produce to manufacture flour.

"Yes, there was a shortage in December until mid-January, but now we have 200,000 tonnes of imported wheat and 260,000 tonnes of local wheat in stock which covers needs for over a month," Muthanna Jabbar, director general of Iraq's grains trading board, said.

"In the coming few days, flour will be available in the market and (average prices) will go back to normal. Wheat is arriving constantly," Jabbar added.
 
INEXPERIENCED COMPANIES 

Poor services are chief complaints of Iraqis, whose war-torn country is trying to rebuild its shattered economy and provide basic services nearly eight years after the U.S.-led invasion that toppled Saddam Hussein. Iraqis also complain of poor quality products and shortfalls in monthly food rations.

Iraq police this week opened fire to disperse hundreds of protestors demonstrating over power shortages and food rations in southern Diwaniya province. [ID:nALS335631]

Despite pressure from rising food prices, the country's inflation remained relatively subdued at 3.3 percent in December.

Iraq is now receiving shipments for its 2011 supplies, which were tendered last year. It still has to finalise a Dec. 28 tender to buy 100,000 tonnes of wheat, two other tenders issued in January and one in February.

Jabbar said the government had awarded tenders to companies that turned out to have little experience or competence.

"These companies submitted good competitive prices lower than other known companies but they failed to deliver the wheat," he said. The companies had since been black-listed.

A spokesman for the Iraqi grain board said price increases had also been triggered by higher consumption during the annual Shi'ite Arbain pilgrimage, which took place last month.

The rise in the price of flour has forced some Baghdad bakeries to temporarily halt work until prices go down. Others have cut their purchases as they cannot sell bread at high prices in some poor areas.

"Prices are high, higher than you can imagine, like the distance between the sky and the ground," said Abu Sadiq, 65, wearing a traditional Arab headscarf and buying produce at a Baghdad market. "But I still need to buy it. This is the first time in months I've seen such prices."

Sugar prices have been rising more gradually by comparison. Four months ago a 50-kg sack of sugar sold at 40,000 dinars or $34 and is now sold at 55,000 dinars or $47, merchants say. 

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