The price of wheat grains skyrockets: – A perfect storm.
Jan Erik Eikeland, marketing director at Norgesmøllene, which produces Mølleren’s products in Norwegian grocery stores, predicts that both bread, pizza and flour can get a price jump in Norwegian grocery stores.
– I would predict that a price increase will occur immediately. At least we see an increase on our part up to seven to eight percent, he says.
Eikeland expresses that we are facing a “perfect storm”:
– In addition to record high raw material prices, there are also very high prices for shipping and increased prices for energy. Our industry is a power-intensive industry that consumes a lot, and the raw material prices for paper and packaging have also increased.
He says they are in an extraordinary situation during the day, where the bottleneck problem as a result of the pandemic hits hard.
– Those who have not bought wheat flour in November and December have missed the golden age.
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Historically high prices for wheat grains
For the first time, it costs more than three kroner per kilo to import cooking wheat to Norway. The reason is crop problems and turmoil in the financial markets.
A weak krone further contributes to the sharp rise in prices.
– At the end of November, the price was NOK 3.13 per kilo. In comparison, the average price in the period 2013–2019 was about NOK 1.70 per kilo.
This is stated by an adviser in the Norwegian Directorate of Agriculture, Andreas Myklebust Moksnes, to Nettavisen.
Expensive to import wheat from abroad
– We are dependent on imports to cover the consumption of food grains in Norway. In recent years, Norwegian food flour mills have imported around 140,000 tonnes of cooking wheat a year, about 50 percent of what they use, says Myklebust Moksnes.
Imported wheat is normally cheaper than Norwegian, and during the pandemic it has been duty free to import common wheat – for the first time since 2011.
Myklebust Moksnes says that since the autumn of 2020, the costs of transporting grain have more than doubled.
– What is the reason for the high prices?
– The most important reason is high demand due to the fact that consumption has increased after reopening in many countries. In recent months, the prices of input factors such as fertilizer have also risen sharply, he says.
The Norwegian Directorate of Agriculture also emphasizes that the supply of wheat, both now and into the new year, will be limited due to weather challenges in important production countries such as the USA, Canada and Russia.
In the EU, the proportion of wheat of food quality is also less than normal.
– Some players probably buy more than they need, as emergency storage is now on the agenda in several places, Myklebust Moksnes states.
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The wheat flour must be of the right quality
– Norway is not self-sufficient in wheat grain, although you can sometimes get the impression of it, says Jan Erik Eikeland, marketing director at Norgesmøllene. He says that a lot of Norwegian wheat goes to animal feed because it does not have good enough quality for baking.
Both the protein level, the size of the grain and how much water the grain absorbs, are decisive for the baking quality of the flour, and whether it should be used for bread, biscuits or pizza for example. This is the reason why Norway imports grain with different types of qualities, which are then mixed with Norwegian flour to achieve the right quality.
– The bread in the store should look and taste the same all year round, while the baking at home should give good results every time. We are therefore completely dependent on importing grain of the right quality to deliver to our customers, he says, and emphasizes:
– It is particularly demanding during the day, because there is a shortage of the right grain on the world market, and raw material prices have gone up, and are 70 per cent higher than last year.
Also read: Norwegian farmers earned an average of NOK 327,800 last year
– Record high imports from abroad
At the moment, Norway imports a lot of grain, and annually the import of grain varies from 30 to 60 percent, depending on how the Norwegian grain harvest turns out. Eikeland states that this year the reason is that there has been a poor Norwegian grain harvest in relation to the quality of the various types of grain needed to grind the grain into wheat flour.
– We have never seen a similar price situation, says the marketing director of Møllerens. The closest we come is 13 years ago, and then it was more about individual events on the world market related to high demand, in combination with poor yields and commodity speculation.
Normally, prices on the world market are lower than Norwegian prices. But now the imported grain is at a record high in price. The situation is therefore as mentioned that Møllerens and other producers must mix expensive international grain with the Norwegian grain to achieve the right quality.
– In our neighboring countries, they are probably even more challenging as they have to buy one hundred percent of the grain in a world market out of control, Eikeland concludes.
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