The Commerce secretary updated this Monday the reference prices of common flour 000 through Resolution 502/2023 published in the Official Gazette, which provided that the 25-kilo bag becomes worth $1,991, which represents an increase of 6.01% compared to last April, and the main concern generated by this forward modification is How will it impact the price of food? and inflation for May.
The ton of flour suffered, now, a year-on-year variation of 65.9% compared to May 2022 and, although it is lower than the inflation of the last 12 months, which reached 108.8%, it is expected that it will be transferred to the price of food, a figure that analysts follow closely, taking into account that inflation estimates for May are high and it is expected to be even above the figure for April, when it was 8.4%.
And this concern responds to the fact that, as explained by Isaac Rudnik, director of the Institute for Social, Economic and Citizen Policy Research (ISEPCI), “the incidence of wheat flour on some of the basic products that make up the food basket and that have an impact on its total value is important”.
How flour affects the basic basket
Thus, the pressure of this essential element of the diet of Argentines affects, mainly, through the breadsince the bag of flour is the main input of bakeriesbut also, sweet and salty cookies and noodles.
Rudnik, based on the surveys that the Isepci carries out month by month in nearby businesses (and which coincide quite with the official ones) the variation in the first quarter of this year of all these products has been higher than 50% on average. And details the following increases:
- The noodles: +55%,
- The bread: +60%
- Biscuits (sweet and salty): +80%
Undoubtedly, the incidence of flour in the total value of the basic basket is very important, both by its own weight and in the incidence it has on the products that are produced based on it. In fact, after the last rise in flour, which was in the middle of last year, a kilo of bread was around $600 on average in bakeries and shops.
According to the director of CyT Asesores Económicos Camilo Tiscornia, “flour derivatives have a weight of approximately 5% in the Consumer Price Index (CPI) published monthly by the National Institute of Statistics and Censuses (INDEC).
So, estimate that there could be a rise of around 10% in flour derivatives for May and this would be reflected in a 0.5% impact on that indexthat is, half a point more than inflation, although he acknowledges that the incidence may be a little higher.
The participation of food in inflation
Rudnik states that “in all these last months food and beverages continue to be the main driver of inflationary acceleration”. And it seems that May will not be the exception, since Tiscornia points out that “the Food item is going to be key in the next inflation measurement and flour derivatives are among the prices that grow the most, along with dairy products and vegetables” .
It also points out that clothing (clothing), public services (which enter into household expenses), as well as household appliances and electronic products are having a strong presence.