Bakeries Shutter as War in Ukraine Drives Up Wheat Prices

CHEDDIKULAM, SRI LANKA — Early morning sunlight streams in the windows as Thankaiya Mageswaran divides a small mountain of wheat flour to make loaves of bread.

Thankaiya, 38, runs Nishan, a bakery that employs three people and operates six days a week in Cheddikulam, a small town in Sri Lanka’s Northern Province. In good times, they go through 120 kilograms (265 pounds) of flour per day to make bread, buns, rusks and cakes, earning 5,000 Sri Lankan rupees ($15) by evening.

Times have changed.

A major economic crisis, compounded by the conflict between two of Sri Lanka’s biggest wheat suppliers, Russia and Ukraine, has resulted in flour shortages, escalating prices, and fewer customers who can afford baked goods. In a country with more than 7,000 bakeries and no way to grow its own wheat due to the tropical climate, the situation has become dire for bakers and their families.

Forced to reduce production and lay off staff, Thankaiya says the situation has made it impossible to support his three children and keep up with payments on the 700,000-rupee ($2,090) three-wheeler he purchased in January to expand Nishan’s delivery business.

“This is a huge loss for me,” he says. “All businesses are going into loss. Oh, God, this situation must not continue.”

The coronavirus pandemic kicked off an economic crisis in Sri Lanka, due to factors ranging from the return of its overseas workers to the collapse of its tourism industry. Today, Sri Lankans are struggling with rampant inflation paired with food and fuel shortages, which have led to long lines for daily shopping and growing political protests. Sri Lanka’s Cabinet resigned on April 3 in response to the civil unrest; the Ministry of Trade couldn’t be reached for comment.

The bakery industry has been doubly hit by ingredient shortages and the rising price of wheat flour, a staple ingredient that European colonial powers introduced in the 16th century.

In 2020, the most recent year with available data from the International Trade Centre, Sri Lanka received 38% of its wheat and meslin, a wheat-rye mixture, from Russia and 8% from Ukraine; the combination cost $164.4 million to import.

read more

Since Russia’s invasion of Ukraine disrupted this supply chain, the cost for a kilogram of flour in Sri Lanka rose from 150 rupees (45 cents) in March to 270 rupees (79 cents) in April. The price of bread jumped from 80 rupees (24 cents) to 150 rupees during that same time.

“I have not bought bread since the price of bakery products went up,” says Jeyakkumar Thilakavathi, 52, a mother of three who makes and sells handbags. “I only cook twice a day now.”

Her family has been skipping breakfast to cut costs, she says, and is relying more on rice — more accessible and affordable, due to the local supply — than wheat products.

Karthigesu Paskaran, secretary of the Jaffna District Master Bakers Association, confirms that the industry’s flour supply has decreased by 40% since 2021.

Thasan Asokkumar, the owner of Sures Bakery in Cheddikulam, says he tried raising prices and reducing production to keep himself and his two staff members employed despite the skyrocketing cost of wheat. But on April 4, after 15 years in business, he made the tough decision to halt operations. He used his dwindling savings to buy seven goats to help support his family until wheat prices return to sustainable levels.

Graphics by Matt Haney, GPJ

Having lost his job at Sures Bakery, Kalimutthu Vikneswaran takes any local day labor jobs he can find.

“Earning enough to feed my three children is a big challenge,” the 36-year-old says. “For one day, I’ll get a job, and another day, I won’t.”

With Sri Lanka already experiencing a “painful time for the people,” says Murugesu Ganeshamoorthy, a senior economics professor at the University of Colombo, a conflict between two countries that are important for trade and tourism has made conditions even worse.

THAYALINI INDRAKULARASA, GPJ SRI LANKA

For 15 years, Thasan Asokkumar baked warm, fresh loaves for customers at Sures Bakery in Cheddikulam. But in April, the rising price of wheat flour forced him to suspend operations and lay off both of his employees.

A global economic embargo against Russia can only worsen the existing crisis, he says, especially if Russia responds by cutting imports of tea and women’s clothing from Sri Lanka and keeping its tourists from the country’s beaches and jungles. “Western sanctions are likely to push up global fuel prices and push up commodity prices.”

With the global and national situation beyond his control, Thankaiya is doing his best to keep his own doors open, one day at a time.

“Closing the bakery will leave me and my staff jobless,” he says. “I do not know any other business.”