Nagra Plunkett and Ross Sheil, Staff Reporters

THE prices of baked goods will rise next week, caused by farmers in the United States deciding to grow corn for ethanol production, encouraged by government subsidies in that country.

Gerry Chambers, president of the Bakers' Association of Jamaica, told The Sunday Gleaner that prices could rise as soon as tomorrow.

"The rising cost of corn has been affecting prices, plus China has been buying up so much wheat and soya. But corn, which is being made into ethanol, is the main culprit," explains Chambers.

The association, which has a membership of 90, is looking at a hike of six to eight per cent. A loaf of bread, depending on its size, now costs consumers between $130 and $220.

"We sympathise with the consumers, but when you get an increase of seven per cent, there is little you can do but pass the cost on to the customers," says Chambers, who is also the managing director of Hilton's Bakery in Montego Bay.

Jamaica Flour Mills Limited, the main producer of raw material for the baking industry, informed bakers on May 11 that the company would be increasing the prices of its products, which include flour and wheat.

This is less than six months after the Bakers' Association adjusted its prices to cushion operating costs.

"Every time you have an increase, you have a slow-down in sales because people's incomes are inelastic," admitted Chambers. "I just think that people's incomes are feeling the blow of continuous increases taking place in the system."

There is concern globally that despite the environmentally beneficial nature of ethanol as a fuel, that producing it from corn causes increased food prices. The price of corn has doubled in the past year.

Corn is processed into foodstuffs and feedstock. As farmers turn to corn-for-ethanol production the supply of corn for other uses falls and prices rise. The output of wheat and other grains also falls when farners switch to ethanol.

nagra.plunkett@gleanerjm.comross.sheil@gleanerjm.com