Global market on verge of acute shortage of grain - flour prices rapidly increase

Another reason for the increase in flour prices is that the COVID-19 pandemic has raised concerns about food shortages in many countries, so several large countries are stockpiling such essential products.

All these events, in addition to an unprecedented drought in the world, lead to an increase in flour prices both at the wholesale and retail levels. It should also be emphasized that along with disruptions in the supply chain, increased transportation costs and delivery times also affect prices.

The following link shows the prices of flour in various countries of the world: https://www.globalproductprices.com/rankings/flour_prices/

Grain prices are determined by the market and all the previously mentioned factors, the shortage of these essential products makes further increases in price inevitable.

The ongoing unfavorable geopolitical situation in the world will sooner or later lead to a rise in the price of flour in Azerbaijan, where the self-sufficiency rate of grain amounts to 62 percent as of January 2022.

According to the latest data from the Azerbaijani State Statistics Committee, wheat imports to Azerbaijan amounted to 400,748 tons from January through June 2022, which is 0.5 percent less compared to the same period in 2021. The total value of wheat imported into the country amounted to $142.9 million (an increase of 39.7 percent).

Nevertheless, in Azerbaijan's case, the increase in grain prices seems to be a temporary phenomenon, as the country is actively working to reduce dependence on wheat imports. In order to significantly increase the production of milling wheat, a special program has been developed in the country, and new types of subsidies are applied.

President of Azerbaijan Ilham Aliyev signed a decree on July 19, 2022 'On a number of measures to increase the level of self-sufficiency in milling wheat'. In accordance with the decree at the initial stage, as a pilot project for food grain produced by persons who assumed obligations to produce food wheat on farms using modern irrigation systems and handed it over to the State Reserves Agency of Azerbaijan and flour mills in line with the contract concluded with the Ministry of Agriculture, starting from 2023, a subsidy will be applied for a period of 5 years.

In addition, the state purchase price for milling wheat will be determined annually until August 1, 2022, and in subsequent years - annually until July 1, taking into account the production cost of milling wheat and the possible profit of the producer.

The liberated territories of Azerbaijan also have a huge potential in the field of grain production.

In particular, the Fuzuli, Aghdam and other districts of the liberated territories were among the advanced grain production areas and contributed to the formation of the grain fund. Given that wheat cultivation is carried out using new technology, it's possible to organize grain production with higher productivity in these areas.

Preliminary estimates show that after the restoration and reconstruction process, agricultural products worth 1 billion manat ($588 billion) can be grown in these territories at the initial stage, a significant part of which is expected to be cereals. From this point of view, the liberated territories of Azerbaijan will have a special share in meeting the need for bread. This will reduce dependence on imports and at the same time minimize the impact of price changes on the global market. It is expected that more than 85 percent of the grain demand will be met by local production.