Parle Products said today that it expected a rise in the price of wheat as Russia and Ukraine were large producers and exporters of the crop. Any disruptions in supply due to the geopolitical tensions between the two East Slavic countries may lead to pushing up prices.
“Palm oil price yesterday was at about Rs 140 per kg and that is putting pressure on the bottom line of most food companies who use palm oil. So, not just oil, even wheat because Ukraine and Russia also happen to be major exporters of wheat. So both the prime raw material commodities which go into food,” Mayank Shah, senior category head, Parle Products, said in an interview with CNBC-TV18. His remark comes as Russia has attacked Ukraine, one of the largest exporters of grains — wheat, corn, and barley — in the world whereas Russia is the largest wheat exporter, accounting for more than 18% of international exports. More than a quarter of the world’s wheat export comes from Russia and Ukraine. So far this week, international wheat is already dearer by over 15%.
Shah said Parle had taken already taken a price hike of 6 to 7% this year. He explained that palm oil prices were at a record high which is hurting input costs. “While we have taken 6-7% price hike, I do not think for most companies there is any further room of absorbing the increase in raw material cost because whatever cushion they had in terms of margins, where they can absorb the increased prices of raw material – that’s already done, but beyond this point, it would be difficult for most companies to do that. So, if this situation continues then you will see further price hikes,” he said.
Even as Parle Products’ top official cited concerns about oversupply and price hikes, he said the company was covered on the inventory front for the next two to three months. “Although we are comfortable on the stocks that we have in India, there would be demand coming in from overseas market for wheat because Russia and Ukraine supply would get affected. As a result of which we will probably, going forward, see an increase in wheat flour prices or wheat prices as well,” Shah said.
Earlier in November, Parle had said the price hike was on account of the tremendous input cost pressures as the price of key raw material palm oil prices had doubled on a year-on-year (YoY) basis. Packaging and laminate costs have also been up between 20 and 35%, it had said, adding that it was seeing a slight shortage of material on the packaging front. Freight costs also climbed on account of fuel prices rising by about 25 to 30%, the fast-moving consumer goods company said in November.
Meanwhile, the demand for Parle products has begun to increase in the rural market, Shah said. “Rural demand has started seeing an uptick and we are hopeful about that,” he added.