Above headline has been a search term to arrive at bakerybazar . Yes All major bakery companies buy wheat from open market either for their own flour mills or to hedge from any sudden rise in price .
This has been the strategy for bigger bakery units to lower their prices . Procurement cell of these companies keep their men in the commodities market and with arrival of wheat they do the negotiations and buy bulk wheat which then can be transported to own storage or to be stored at flour mills and these mills can be paid only conversion or milling charges .Miller take orders to fill in their idle capacities .
Second option is to have contract farming where companies enters into contract with farmers for certain volume of wheat at a price lower than the market price and buy that wheat after the cultivation . Farmer are also willing as they get bulk order at good price from any government minimum price .
Many advantages of this strategy .
- Reduce cost of flour
- Sure of quality of flour
- No Middlemen hence reduces cost
- Can sell excess wheat when prices are high
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