ImagePrice has risen 15% in the past year.

Prices of Gardenia High Fiber White Bread (400g)

S$1.95    S$2.00    S$2.15    S$2.25         
19 Sep 07    23 Sep 07    25 Nov 07    4 Sep 08

COMMODITY PRICES have crashed but that may not translate to a lower household bill.

Prices for Gardenia bread, the most popular brand consumed in Singapore, for example, have continued their uptrend unabated (up 15% over the past year), despite wheat prices having fallen by half in the past six months, as the chart below shows.

ImagePlunge in the price of wheat

Source: Bloomberg
Thankfully, commodity-like products such as gasoline pass on more of their fluctuations in raw material cost to customers.

This can be seen in petroleum prices coming off some 12.5% in the past 3-4 months, reflecting the 50% drop in crude oil prices over the same period.

(From a high of close to US$150 a barrel in July 2008, crude oil prices have halved to about US$70 a barrel currently.)

The lack of price correlation between retail goods with the cost of source materials is a reflection of how fragmented the end-customer market is.

Bread eaters, having a more fragmented customer profile than automobile drivers, are more likely to be price takers with little bargaining power.

Source: Bloomberg
Conversely, marine fuel is more price elastic to the cost of raw materials compared to gasoline as each ship is a relatively significant variable to the bunkering supply chain.

This can be seen in how bunkering costs fell in direct tandem with crude prices, falling 50% from over US$700 a ton to about US$350 currently.

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