October 19, 2015 Kh-Index | Do local flour prices follow the global trend?

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19 October 2015

The average price of cooking one Imeretian Khachapuri currently stands at 3.46 GEL, which is 0.9% lower month-on-month, and 3.2% higher year-to-year. While the Index is primarily affected by the price of Imeretian cheese (the most expensive Khachapuri ingredient), during much of 2015 some moderating influence on the Index has been exerted by flour.

Last month, the price of this strategically important product fell by 3% m/m, and by 6.3% y/y. To some extent, this change reflects external developments that are beyond Georgia’s control. This is so because Georgia heavily relies on the imports of both milled flour and raw wheat (which is milled locally).

Global wheat prices have been on the decline for quite some time now, falling from the peak of $330 in May 2014 to about $170/bushel in September 2015. As can be seen on the graph, the local flour market did follow the global trend in 2015 despite the almost 40% erosion in the value of Georgian currency (which directly affected the price of imports). Interestingly, however, it took six(!) months (until November 2014), for the Georgian flour market to start adjusting downward. Since then, flour prices have fallen from about 1.63 GEL to 1.53 GEL/kg in September 2015, helping Georgia’s poorest families to weather the storm of depreciation.

Tags: #index, #khachapuri index, #inflation, #prices, #wheat,

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