Wheat prices up 60% since January, importers seek state support

A decision by the Maltese government to subsidise the global hike in the price of imported wheat, barley and other grains is expected by Monday or Tuesday, MaltaToday has learned. 

The price of wheat has risen by almost 30% since the Russian invasion in Ukraine and 60% since January, with Maltese importers and producers scrambling to secure alternative supply sources. 

But the rise in wheat prices will not be absorbed for much longer, importers who spoke to MaltaToday said. 

Wheat rose to $373 per tonne on Friday on the futures market, 30% higher than the $287 it closed at on 23 February, the day before the Russian invasion. 

Importers and producers held meetings with government officials this week to discuss the alarming rise in prices and the supply shortage as war in Ukraine rages on. 

Marco Cachia, CEO of Federated Mills, Malta’s largest wheat importer and flour producer, said the company was seeking sources of wheat outside Eastern Europe, with resulting sanctions on Russia making it impossible to use their traditional supply chains. 

He said his company, and other suppliers and producers, were in direct contact with the agriculture and finance ministries to keep them abreast of any developments since the situation remained fluid and changing on a daily basis. 

Prime Minister Robert Abela this week announced the government would continue to provide financial support “whatever the cost” to ensure energy and fuel prices remain stable despite the Ukraine war. 

LPG prices also skyrocketed in the wake of the Russian invasion: finance minister Clyde Caruana said the government is expected to budget easily €200 million over and above another €200 million earmarked for the post-COVID response to inflation and supply chain disruptions. 

While Abela has promised targeted help for the animal husbandry sector hit by higher costs in animal feed, no mention was made as to whether similar assistance would be provided to wheat and grain importers and local producers. 

“The problem we are facing is two-fold, logistics and payments,” Marco Cachia said. “Because the Black Sea is currently closed off because of the actions of Russian warships, trade shipping routes have been disrupted and no wheat is making it out of Russia or Ukraine through that channel.” 

Cachia said his company sourced most of its wheat supply from Russia, which provide a higher quality certification than Ukraine. “But when we approach our regular contacts in Russia, we now find ourselves not being able to pay for the supplies, because banks are not accepting to transfer money following the sanctions imposed by the European Union, the US and other countries on most Russian banks.” 

The EU has imposed financial and technological sector restrictions against key Russian agencies, including the presidential administration, the Russian defence ministry, foreign intelligence, state structures, as well as military industrial corporations, financial companies and banks. 

On 2 March, the EU froze the foreign reserves of the Russian Central Bank and banned Bank Otkritie, Novikombank, Promsvyazbank, Rossiya Bank, Sovcombank, VEB, and VTB BANK from the SWIFT system - a measure that also applies to anyone established in Russia whose propriety rights are directly or indirectly owned for more than 50% by the same banks. Cachia insisted there was no shortage of wheat at the moment or for the foreseeable future. But with global supply suddenly affected, prices are climbing steadily as countries and importers look to alternative suppliers. 

“With our normal supply channels currently in question, we have been contacting other suppliers outside the EU, including in the US and beyond,” he said. “And we are now focusing on increasing our storage volume.” 

He said the government had already given the go-ahead for the company to use additional storage space as necessary at the Corradino Grain Terminal, allowing the company to secure the best-priced supplies of wheat without worrying about storage limits. 

Cachia said he was confident that, with the government aware of the global situation and appraised of local importers’ and producers’ concerns, a solution could be found to ensure the consumer does not have bear the brunt of the increases. “At the same, we – like all other suppliers and producers – are commercial enterprises at the end of the day and we too cannot afford to absorb such losses. And unfortunately, the price of wheat affects many other sectors and industries, including animal husbandry, bakeries and milk producers.” 

Robert Cauchi, Group CEO at the Koperattiva Produtturi tal-Ħalib (milk producers coop) told MaltaToday they too were focusing on storing as much produce as possible to meet demand and keep prices stable. 

He confirmed that meetings were held this week with senior government officials to discuss the effects of the Ukraine invasion on the price of wheat, barley and other grains. “We are pleased that everyone is coming together in a cooperative spirit to ensure that we are prepared for any eventuality,” Cachia said. 

A similar scenario is playing out at Liquigas Ltd, a leading importer and distributor of LPG. A senior Liquigas Malta official said that consumers should not be worried about a lack of supply of LPG because the company had secured enough supplies of LPG “for a good number of months”. The company has also secured alternative supply sources, thanks to the support of SHV Energy, a Dutch company shareholder of Liquigas Malta, which is a global leader in the distribution of LPG across more than 25 countries worldwide.