No advantage on customers – Namilco

Sep 30, 2008 News

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The National Milling Company of Guyana (Namilco) has vehemently denied reports that it is taking advantage of customers and industrial clients by charging prices that do not correlate with a declining price for wheat.
Namilco contends that it is currently working on projects to further expand the offering of consumer products to the local market so that the Guyanese consumer has an adequate supply of nutritious, high quality, cost effective and convenient flour-based products.
A press release from the company stated that Namilco has been supplying the Guyanese market with flour for almost 40 years — since 1969.
It added that during that time it has maintained the highest ethical standards as a citizen of the business community and of the country.
“Namilco’s presence has facilitated the ability of bakers and consumers to receive freshly-produced flour, as opposed to imported flour, which may be several weeks or months old.”
According to the release, Namilco’s “dominance” in the market is not as a result of being a “monopoly” (the market was opened to imports in July 2007) but as a result of satisfying the needs of consumers., offering quality and well known brand name products, such as Thunderbolt, and the introduction of new products during the last ten years which has enabled the Guyanese consumers to buy products particularly customized for local use (Maid Marian Roti Mix, Self Rising and Pholourie Mix).
Namilco has said that, since it has been operating in Guyana, it has made and facilitated several vital contributions to the country.
In the recount of the prior year’s events, the release added, it is clear that Namilco, though facing unprecedented cost challenges, has made every attempt to minimize the effects to the Guyanese market.
“In recent years, Guyana has purchased commercial wheat from the United States and Canada. Given the relatively close proximity of Guyana to North America and the normally abundant supply of high quality spring and winter wheat classes, the US and Canada were the most logical suppliers.”
During the second half of 2007, the world price of wheat began to escalate. In the first half of 2008, prices took an even faster ascent to stratospheric heights.
In addition, the release said, supplies of spring wheat became scarce.
“The US and Canada, the world’s only two sources of this superior wheat class, had difficulty offering sufficient quantities for all buyers. The net result was that from early February to the middle of March this year, spring wheat was being offered far in excess of US$80 per metric ton.
Winter wheat, though available in the market, continued to increase in price, even after spring wheat price began to come down.
“To add insult to injury, costs for ocean freight also rose dramatically in 2007 and on into 2008. Cargoes that formerly cost US$50 per metric ton to deliver have recently cost over US$100 per metric ton.”
Therefore, on March 1, National Milling’s aggregate raw material cost, if based on the day’s market prices, would have easily been more than US$900 per metric ton (a combined blend of spring and winter wheat, including freight), Namilco said.
“Keeping in mind that one is able to obtain about 77 per cent of flour from wheat, the value of wheat in one ton of flour exceeded US$1,100 (equivalent to G$10,178 per bag) which does not even consider the operating costs or overhead costs.”
According to Namilco, prior to the recent price adjustments, National Milling was selling Thunderbolt flour in big bags for the equivalent of US$789 per metric ton, or the equivalent of $7,300 per bag.
Therefore, it added, the market was receiving a huge discount compared to the then present day value of the raw material.
According to a chart provided by Namilco showing the current world retail price comparison of flour in US dollars, Guyana has the lowest cost of flour compared to the UK, USA, Canada, Jamaica, Grenada, Barbados and Trinidad. Namilco says that this is without the subsidy. 
“National Milling has again reverted to milling spring wheat from North America as predominant class of wheat in our leading Thunderbolt label. While spring wheat is still more expensive than many other common wheat varieties, its quality is well appreciated local market.”
The release said that most bakers are therefore willing to pay a premium for this high quality flour vis-a-vis flour from other blends of wheat.
“Of course, the current shipment was received in August when prices for spring wheat, before ocean freight is added, were over US$500 per metric ton. Prices for this very same wheat are now close to US$150 less than they were at the time of purchase.”
According to Namilco, it is therefore easy to see that the current price for Thunderbolt Bakers flour ex factory of only $7,000 is absolutely a bargain for the bakers. “One baker is paying in excess of G$10,000 for a bag of flour imported from within the region.”
National Milling contends that they do not operate with a monopoly position as some would claim.
“Assuming that the country wishes to maintain some base of manufacturing, we must find some way to compete equitably, lest the country someday finds itself wholly reliant on imported flour.”

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