In March last year, after the Russian invasion of Ukraine, the price of Argentine wheat rose by 45%. Bread should increase by 8.45 pesos per kilogram, flour by $ 9.7 per kilogram, and noodles by $ 7.05 per kilogram. However, the reality ended differently: bread rose by 38.46 pesos per kilo, flour by $ 10.87 per kilo and noodles by 14.62 pesos per kilo.

These data come from a report by the Buenos Aires Grain Exchange, which began assessing the impact of wheat price volatility on end products such as bread. The study concluded that, for example, analyzing the monthly volatility of bread, flour and noodle prices from 2017 onwards, on average, “only 9.8% of bread price volatility comes from international price volatility and 11% from exchange rate volatility.” Meanwhile, a 45% increase in grain prices by 0.3% is reflected in the overall CPI.

In this regard, he noted: “Other variations in the price of the final goods come from other local factors.” He added that “the policy of intervention has a significant impact on consumer prices and demand for the price of a primary product, in this case wheat, while it has a negative impact on producers and supply.”

For the Buenos Aires grain exchange, fluctuations in flour prices are influenced by changes in international prices. According to the subject, the latter may be due, on the one hand, to “its internal composition, where wheat is the most important input, representing a higher percentage of costs.”

“But on the other hand, this is a product that is usually subject to interference in the final price. “During the analyzed period, more than 40% of the surveyed retail prices were part of the Care Prices program, except for 2018-2020, when the percentage fell by less than 10%,” he said.

In the case of dry flakes, he noted that “changes in international wheat prices barely account for an average of 13% of its final price volatility.”

According to the report, consumption of products made from wheat accounts for 19% of total food expenditure. It shows that per capita consumption is declining while incomes are rising, and that price volatility will affect low-income sectors.

“The variability in the prices of these products is mainly influenced by other factors, because even in periods when international prices record a significant increase, local prices increase proportionally, four times more in the case of bread, and twice as much. In case of noodles, “he showed.

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For the organization, instead of using measures that can restrict supply, or production, it should act on demand.

In a paper by Jimena Vicente Masaro and Augustin Tejeda Rodriguez, the policy of direct access to consumers “reflects tax savings.”

“Subsidizing the entire population below the poverty line, so as not to hurt the rise in prices for wheat products, requires 40% less resources than, for example, compensation for the processing industry. [el Gobierno recaudará entre 370 y 400 millones de dólares con la suba de las retenciones a la harina y el aceite de soja para subsidiar la harina para las panaderías]; “If this is explained only by the price of wheat and the exchange rate with the increase in food prices, the savings will reach 80% of the estimated resource,” he said.

“Such a policy has the advantage that it does not adversely affect producer incentives and, consequently, the performance of production and exports, as does the policy of export restrictions and rights,” he added.

As described in detail, the amount of subsidy for the population below the poverty line (17.3 million people) will be from 58.7 to 183.8 million. This is less than what is expected to be collected by Argentina in an additional way due to rising international grain prices: $ 1.4 billion, of which $ 153 million comes from wheat exports.