CASE STUDY

PRICE OF PINOY TASTY SEEN TO GO UP

The price of Pinoy Tasty ( sliced loaf of bread made of cheaper flour ) may go up by to to 15 percent effective this month due to higher cost of flour.

Bakers said this yesterday ahead of the anticipated announcement today of the Department of Trade and Industry(DTI) on the possible impact of the possible imposition by the Department of Agriculture (DA) of higher tariffs on Turkish flour, which is used in Pinoy Tasty.

Currently priced at P37 per 450-gram loaf, the Pinoy Tasty could hover near P40 per loaf, bakers said.

According to the bakers, supply of Turkish flour is quickly vanishing following the announcement last Monday of DA Secretary Proceso Alcala that he would recommend the imposition of a 20-percent duty on flour coming from Turkey.

The sources said they have yet to get a copy of the administrative order that would put in effect the higher duty on the product.

But presidential spokesman Edwin Lacierda did confirm that there is a pending hike in the prices of Pinoy Tasty and Pinoy Pandesal but assured the public that their prices would remain at their current levels for now, pending a review of the proposed new rates by the DTI.

Lacierda also assured that other bread products are not covered by the proposed increase.

The bakers said the 10 to 15 percent increase is based on a formula of major ingredients, the biggest component of which is flour. They said they were able to justify the increase with the DTi.

The bakers met with DTI Secretary Gregory Domingo last Tuesday.

Bakers said they buy locally milled flour P880 to P900 per 25 kilogram bag but Turkish flour remains cheap at P720.

The bakers also told the National Price Coordinating Council two weeks ago that they do not have an alternative for Turkish flour since the locally milled cheaper variant "Harinang Pinoy" does not meet their standards.

The Philippine Association of Flour Millers (PAFMIL) has petition with the DA the imposition of anti-duming duties against Turkist flour.

Based on its petition, PAFMIL said the average price of Turkish flour in 2010 was $276 per metric ton while its domestic price was $600.

The following year, the export price was at a average of $388 per mt against $600 per mt in Turkey. Last year, the average export price was down to $340 per mt but the domestic price was at $470 per mt.

PAFMIL, claims that exports of Turkish flour to the Philippines grew 16 percent in 2011 and by 71 percent last year. This is in contrast with the growth of the local flour milling industry of 1 to percent per year.

Meanwhile, Lacierda said, the DTI Director Vic Dimagiba through Undersecretary Zeny Maglaya, met with the different Millers and bakers association in the country following reports of a pending price increase in bread after the department of Agriculture proposed a tariff hike on imported flour from the current 7 percent to 20 percent.

Source:www.malaya.com.ph.

Reprinted with permission from Malaya Business News writers August 1, 2013

Questions: With Graphical representation

1. Do you think the demand for Pinoy Pandesal and Pinoy Tasty is elastic? What do you think will happen to the demand for pandesal and Tasty when prices increase by 15% and by 100%?
2. What do you think will happen to the supply of pandesal and tasty if the price of locally milled flour increase by 15% and by 100%.
3. What are the substitutes for pandesal and tasty? Do you think the prices of these substitutes will likewise increase?
4. Do you think the government should implement a price ceiling for pandesal and tasty?