Milan, Aug 31 - Italy's biggest milling group, Grandi Molini Italiani, will hike flour prices by more than 50 percent by the end of this year to offset soaring wheat prices and will stop export to focus on domestic market, its head said.
Fears of a spike in food price inflation this autumn have been running high in Italy, fuelled by announced price hikes by some pasta and poultry producers. Prime Minister Romano Prodi said on Thursday food inflation worries were not justified.
Grandi Molini Italiani's Chairman Antonio Costato told Reuters on Friday his group, which processes 1.2-1.3 million tonnes of wheat a year, was seeking to pass on increasing costs after wheat prices shot up this summer.
"We are increasing prices already, at double figures...If we compare the price we were selling (flour) in June 2007 and the prices we are negotiating now for November-December, it is more than 50 percent," Costato told Reuters.
"We have no choice. If it had been a (wheat) price hike of 5 percent, then OK. But we are talking about a 100 percent (wheat) price hike," he said in a telephone interview.
Costato said flour price rise coupled with expected increases of butter and egg prices were likely to push higher prices of bread, pasta and bakery products.
Italian consumer groups have called for a "pasta strike" on September 13 to protest against an expected spike in food prices in the coming months driven by bread, pasta and dairy products and leading to an estimated annual 7 percent food price hike.
QUITTING EXPORT MARKETS
Raising flour prices would help Grandi Molini Italiani keep high margins as the group, which used to be the world's biggest flour exporter, plans to stop exports this year to focus on a highly competitive domestic market, Costato said.
The group decided to exit from foreign markets some 10 years ago, when it still accounted for 10 percent of global wheat trade but started losing foreign clients as local millers gained strength in the developing countries, the group's main markets.
"This year we will stop the export... We are loading the last vessel now, to Cuba, 13,000 tonnes," Costato said. "We will keep some export of flour for making pizza, semolina for making pasta, but the bulk activity will stop."
Exports -- mostly soft wheat flour -- accounted for 20 percent of the group's 300 million euro ($409.8 million) annual revenues and sales volumes. Exports were earmarked mostly for northern and eastern Africa.
The remaining 80 percent of output accounted for 23 percent of flour and 15 percent of durum wheat semolina consumed by food industry, 12 percent of bakery and 35 percent of consumer demand in Italy, according to the group website Costato said he was confident the group would keep sales and margins on the domestic market.
The group's plans to start up a 1.3 million hectolitre bioethanol plant by the end of 2008 may suffer delays, depending on Italian legislation and situation on the commodities market, he said, without giving more details.