Will bread soon become more expensive? Owners of bakeries that produce price-controlled bread intend to apply soon to the Economy Ministry with a request to raise its price, following an increase in the price of flour set to take effect at the beginning of November. However, the rise in the price of this basic raw material is also expected to reach non-controlled bread, cakes, cookies, and other baked goods purchased in bakeries and retail chains.
Flour mills in Israel have notified their customers of price increases ranging from 10% to 15%, depending on the type of flour and the supply contracts. Some of the new prices will take effect as early as November 1, and others during December. The Bar-Rav mill in Tel Aviv, one of the largest and oldest in the country, which supplies flour to Osem and Bonjour, among others, has already announced an 11% price hike at the beginning of next month.
The main reason for the price increase is the escalation in the war between Russia and Ukraine, which has damaged the wheat supply to Israel. Russia has been a main source for wheat imports over the past two years, but Ukrainian attacks on ports and ships in the Black Sea have caused suppliers to cancel orders, including shipments intended for Israel. Consequently, flour mills are forced to look for alternative suppliers in Poland and other Western European countries, and to pay significantly more.
According to data provided by the mills to their customers, wheat prices from alternative import sources are 35% to 40% higher than those paid a few months ago. Added to this are increased maritime freight costs, a wheat shortage due to weather damage in various countries, and kashrut restrictions that limit the possibility of purchasing wheat from additional sources.
Local wheat is also making production more expensive. Last year, following a drought, almost no wheat grown in Israel was used. This year, the mills returned to purchasing it, but its price is set according to the price of American wheat, which is considered particularly expensive.
Rising wheat costs put pressure on bakeries and consumers
Sources in the baked goods market say that manufacturers will not be able to absorb the full rise in costs, and are therefore expected to update prices for consumers. It is still unclear by how much products will become more expensive, as flour is only one component of production costs, alongside workers' wages, electricity, packaging, and transportation.
The problem is more complex when it comes to state-controlled bread. Unlike other baked goods, whose manufacturers can set their prices, price-controlled bread is forbidden to be sold above the price set by the government. Therefore, bakeries will have to apply to the Economy Ministry to request approval for an increase. Until a decision is made, they will have to deal with the new costs without the ability to roll them directly onto consumers.
For the public, the significance is that another basic product found in almost every home in Israel could join the wave of price increases. Even those who prefer to buy flour and bake themselves will not necessarily save money, as the rise in the raw material price is also expected to reach bags of flour sold in supermarkets.