‘We don’t have a plan B’ for more expensive wheat, says biscuit and pasta maker

Manufacturers of bread, cakes and pasta have already turned on the alert: they work, on average, with 20 days of wheat flour stock.

The war in Ukraine, which made the price of a ton of wheat on the international market soar, began on February 24, exactly 20 days ago this Wednesday (16). Here in Brazil, the price of industrialized pasta, cakes and breads has already increased by at least 15%.

The market moves R$ 40 billion a year in the country, with a consumption of 3.5 million tons of products, according to Abimapi (Brazilian Association of Biscuit, Pasta and Industrialized Bread and Cakes).

“The country depends on 50% to 60% of imported wheat, which comes almost entirely from Argentina. Mills that process the wheat to turn it into flour, like ours, are already passing on an increase between 30% and 45% for the industry,” he told sheet Marcos Pereira, director of the South and Southeast business unit at J. Macedo. “The increase depends on how much stock the mill has, which reaches a maximum of 70 days”, he says.

The company, which owns four mills and two factories, under the brands Dona Benta, Sol, Petybon, Brandini, among others, is one of the largest manufacturers of wheat flour and pasta in the country. With wheat flour, it serves bakeries, wholesalers and distributors.

“From the beginning of the conflict until now, the kilo of flour, the packages of macaroni and biscuits have already risen 15%, depending on the product”, says Pereira. “We will have a new increase, which will be decided by the end of the month. Even if the conflict ends tomorrow, we will have a new high, but the sooner it ends, the smaller the transfer will be”, he says.

According to the executive, J. Macedo needs to buy wheat today, which will be delivered within two months, at the corrected price of the day. “If we don’t raise the price now, we don’t have the margin to generate cash, that is, we won’t have the money to pay for the operation.”

Last year, he says, when there was a significant rise in the price of rice, the consumer went to pasta – a product that is present in 98.8% of Brazilian homes, according to the Kantar consultancy. “Now we don’t have plan B”, says Pereira. “We will have to pass on a new increase next month, until reaching all the flour high within 60 days”, he says.

According to the Executive, there will be even left over for retail. “For the first time in three decades of work, I see retailers recognizing that they need to reduce their margin to sell.”

On the other hand, Selmi, owner of the Renata and Galo brands, the second largest pasta maker in the country, after M.Dias Branco (owner of Adria), prefers not to say how much the increase in the price of the products will be – but the readjustment will still come. this month.

“Certainly, we will have a price increase in all wheat derivatives”, says Marcelo Guimarães, commercial director of the Selmi group. The size of the transfer also depends on how much wheat is used in each category. “In cookies, on average, 30% of the cost of the product is wheat, already in macaroni are 70%”, he says.

Replacing wheat with corn is not an option, according to manufacturers

Starting to produce pasta with derivatives of another cereal – as it happened in the 2nd World War, when the most common was corn bread, for example – is not an option today, according to manufacturers.

“There is no way to grind corn in a wheat mill, it is a different operation”, says Pereira, from J. Macêdo. The food industry’s production process uses wheat flour as a carbohydrate in different product categories – any change would require costly adaptation, he says.

Apart from economic reasons, there is the taste of Brazilians, who are very used to consuming wheat flour derivatives, especially in pasta. Derivatives of other cereals, such as rice and corn, even exist on the market, but as gluten-free options.

According to Marcos Henrique do Espírito Santo, sector analyst at Lafis Consultoria, Brazil imports half of the 12 million tons of wheat it consumes each year. “Of this total, about 90% come from Argentina,” he says. “Manufacturers don’t usually store for more than 60 days, because they don’t have the capacity for that”.

On the Chicago Stock Exchange, a reference for agricultural commodities, the price of wheat rose 24.6% from the beginning of the conflict to Tuesday’s trading session (15), to US$ 11.54 a bushel (a measure equivalent to 27.2 kg).

In February, the ton of wheat flour reached R$ 1,708, up 14.6% over the same period in January 2021 and a jump of 75.5% over January 2020, according to information from Cepea-Esalq/USP (Center for Advanced Studies in Applied Economics), which tracks agricultural prices.

The data take into account the price of wheat in Paraná, the largest national producer, next to Rio Grande do Sul. “But wheat production is expanding in the cerrado, in Minas Gerais and in the interior of São Paulo”, says the analyst at Lafis.

Now, national wheat flour manufacturers are asking the federal government for an exemption from the TEC (Common External Tariff) charged for wheat that comes from outside Mercosur, to guarantee supply. Among the largest global producers of the grain, after Russia and Ukraine, are the United States, Canada

According to Espírito Santo, the wheat derivatives industry was already being affected by high logistics costs, especially freight, with the increase in demand for container ships. “The recent surge in the price of oil has further increased this account, a factor that also weighs on the price of packaging,” he says.

Brazil is not short of wheat, highlights the president of Abimapi, Cláudio Zanão. “The question of replacing wheat with another cereal is not up for discussion,” he says.

As for the increases, Zanão believes that the industry should gradually pass on the high wheat, so that the consumer can absorb it. “Otherwise, the product will be stranded on the shelf.”