WILL CONSUMERS BENEFIT?

Both Wednesday’s decision by National Flour Mills (NFM) to slash prices of two of its brands of flour, Ibis and Lotus, by 20 percent and the earlier reduction by Nutrimix in the price of its Country Pride flour should mean that the savings are effectively passed on to consumers particularly with respect to the price of bread. This has not been generally the case in the past. Bread prices which went up with every increase in the cost of flour generally have tended to remain at their new levels even when there was a subsequent reduction in flour prices. The argument advanced by bakeries has been that rising costs in overheads including labour and transport have forced them to do this.

With a relatively large percentage of the population either earning the minimum wage of $9 an hour or living on subsistence level pensions, including old age pensions the 20 percent drop in flour prices announced by NFM and Nutrimix’ slash in prices if passed on by supermarkets can, however, have an impact on average householders. An earlier statement by Nutrimix that it had been able to reduce the price of its Country Pride as a result of savings effected through new technology and modern plant equipment has inferred that the higher price charged by NFM for its Ibis and Lotus flour had not been due only to the cost of wheat imports. This was a point borne out by Minister of Legal Affairs, Danny Montano, who pointed out that he had been saying for some time that NFM “does not operate as efficiently as it could.”

In addition, he emphasised that the National Flour Mills had failed to use commercial mechanisms of hedging, in the past, to combat price inflation when purchasing its raw materials. And, as Montano added, there had been “certainly opportunities for hedging.” What is emerging, however, is that what may have been a crucial factor in the former high prices for National Flour Mills’ Lotus and Ibis flour, imported inflation and failure to adopt a policy of hedging, nothwithstanding, was NFM’s monopoly position. This has been exposed by the relatively recent entry of Nutrimix into flour production. NFM, a former substantionally State owned entreprise which today trades on the Trinidad and Tobago Stock Exchange (at $2.85 cents a share) previously had enjoyed a monopoly in flour production, along with special tariff protection against flour imports.

Flour production by Nutrimix, together with the company’s pricing, has forced National Flour Mills to have a rethink on its wholesale price for flour, a position which will see its flour at reduced prices on the shelves of supermarkets and shops. National Flour Mills should, however, have long geared itself not merely for the domestic competition today provided by Nutrimix but for the around-the- corner international competition, whether triggered by the World Trade Organisation or the proposed Free Trade Area of the Americas. In the end, however, it is the consumer who benefits from competition.