Consumers facing 9% increase in cost of bread

Irish consumers are facing a 9 per cent increase in the price of bread due to Brexit tariffs being applied to flour imports and increased costs for the sector, Food Drink Ireland has warned.

The Ibec group representing the food and drink sector on Monday expressed concern about the impact of rules of origin in the EU-UK Trade and Co-operation Agreement (TCA) on the Irish bakery sector.

It said the deal will result in tariffs being applied to flour imports and increased costs for the sector. It has called for a derogation for the Irish bakery sector in order to avoid these tariffs.

On the issue of whether producers have stockpiled, the group said shelf life for flour was about two weeks, meaning any price increases could come into effect within a relatively short period of time.

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“Unlike a lot of ambient-packaged foods which have relatively long shelf lives, industrial flour used in bread bakeries is normally used within two weeks of milling,” it said.

“Flour currently being used has been milled or imported since January 1st, so this is impacting the bakery sector already.”

As to whether the impact will be passed on to the consumer, it said: “Pricing is a matter for individual companies but the tariff impact has to be absorbed at some point in the supply chain from bakery to consumer.”

Rules of origin

Food Drink Ireland director Paul Kelly explained: "Under the rules of origin in the TCA, there is a requirement that the wheat used should be of UK or EU origin, with a maximum tolerance of 15 per cent for grain from other countries such as Canada or the USA.

“If the wheat used to make flour is more than 15 per cent of third-country origin, the full tariff of €172 per tonne becomes payable.”

He said this was a “significant problem” for the Irish bakery industry, which purchases flour from millers in Britain with a high proportion of third-country wheat, mainly Canadian or American, which is rarely below the 15 per cent tolerance level.

“There are no industrial milling options available in Ireland since the closure of a number of mills in recent years and since then Ireland has not been self-sufficient in flour,” he continued.

“Eighty per cent of the flour used in the baking sector is imported, mainly from Britain, and the product specifications for much of that requires a higher percentage of US or Canadian wheat than allowed for in the tolerance rule.

Distorted marketplace

“This results in a distorted marketplace where a British-, Northern Irish- or EU-based bakery competitor, using the same specification flour but not facing the same tariff, will be at a significant competitive advantage selling their finished product in the marketplace versus an Irish-based bakery. This is a problem uniquely faced by Irish-based bakeries.”

Food Drink Ireland said that by exceeding the tolerance, the full tariff of €172 per tonne will apply to flour imported from Britain. This is equivalent to a 50 per cent increase in product cost.

Based on projections by the Economic and Social Research Institute, this would equate to a 9 per cent consumer price increase in bread.

The tariffs will have a “significant negative impact” on the competitiveness of Irish-based producers of breads and bakery products both on their domestic and export markets.

“In order to avoid distortion of trade and negative impacts on Irish consumers we are seeking a derogation for the Irish bakery sector from this specific rule of origin in order to deliver a tariff-free solution and put the businesses on a level playing field with UK and EU bakery competitors,” added Mr Kelly.