November 2022: The Palaw Index drops by 16.7%.
Wheat flour prices face a drop of 33% on an annual basis.
The average cost of cooking palaw in Ashgabat was 80.6 Turkmen manat in November 2022, which is 4.6% lower month-on-month (MoM) compared to the prices observed in October 2022 (84.5 manat) and 16.7% cheaper year-on-year (YoY) compared to the similar period last year in November 2021 (96.7 manat). This is the sixth month (June-November 2022) in a row that palaw prices decline based on YoY after dropping by: 13.4% in June, 9.1% in July, 28.8% in August, 27.1% in September, and 15.9% in October 2022.
Similar to the trends of the last five months, prices of all palaw ingredients except for rice have fallen in November 2022 on YoY basis. Prices of carrots dropped (-38%), onions (-4%), wheat flour (-33%), sunflower oil (-29%), and beef (-21%) YoY in October 2022 compared to October 2021. The price of rice, on the other hand, has risen by 15% over the same period of time (see Figure 1).
Swings in rice prices
Rice prices peaked in August 2022 reaching 24.8 manat and started to drop in the next 3 months to 20.4 manat in November 2022. Monthly price declines starting from September 2022 correlate with rice harvests taking place in autumn in Turkmenistan. New harvest entails more supply to the market, which results in price declines for the product.
Even though rice prices have declined based on MoM over the last 3 months, when we compare its prices YoY, (for instance November 2022 vs November 2021), we do not see such a decline anymore. When we look at the past data, rice prices declined starting from August 2021 to October 2021. It shows that MoM price declines of rice over autumn have more to do with harvesting season, which results in more supply and reduced price. Therefore, to avoid this, we compare the prices of rice with the similar months of last year.
Rice prices continue to rise YoY for the sixth month in a row increasing by 41% in June, 38% in July, 10% in August, 8% in September, 28% in October, and 15% in November 2022. In our Palaw Index August 2022 report, we concluded that such a steep increase in rice prices has more to do with water shortages in Turkmenistan.
The prices of wheat flour fell by 33% YoY between November 2021 and November 2022. In Palaw Index, we collect the price of Kazakh wheat flour, which is bought primarily in USD. According to OEC, the majority of imported wheat flour to Turkmenistan come from Kazakhstan (84.3% of all imports) and Russia (15.1% of imports) as of 2020. Therefore, the value of the USD exchange rate is vital for the prices of Kazakh flour sold in Turkmenistan.
Due to the government restrictions on the free exchange of foreign currencies in Turkmenistan, businesses rely on the value of the black-market exchange rate. Its value fell by 18.4% from 23.3 manat in November 2021 to 19 manat in November 2022. Looking at the whole year, the average market exchange rate amounted to 28.9 manat in 2021 against 19.4 manat in 2022 (January-November), which is a 32.9% decline. We can see that it correlates with the 33% decline in wheat flour prices in November 2022.
In the first 8 months of 2022 (January-August ), Kazakhstan exported 27,720 tonnes of wheat flour to Turkmenistan amounting to 11.07 million USD, which is almost 2 times higher in monetary terms compared to the similar period last year. During the similar period in 2021, Turkmenistan imported 18,600 tonnes of wheat flour for 6.33 million USD. The average price of imported flour from Kazakhstan was 340 USD per 1 tonne in 2021 and 399 USD in 2022, which is 17.3% more expensive.
Moreover, Turkmenistan imposes duties (taxes) on the imports of wheat flour (I and II types) at 200 USD for 1 tonne. It means, import duties will increase the price of Kazakh wheat flour sold in Turkmenistan by 0.20$ per each kg. Based on the value of the black-market exchange rate, import duties per 1 kg will amount to 3.8 manat.
What about monthly price changes of palaw?
On a monthly basis, prices of palaw ingredients have been quite stable around 80-85 manats since January 2022. This correlates with the value of the black-market exchange rate, which kept its value stable at 19-19.5 manat since January 2022. Please see the evolution of PI prices together with the USD exchange rate from November 2021 to November 2022in Figure 2.
Prices of ingredients in the Palaw Index are collected for 1 kg of onion, carrot, beef, rice, and flour, and 1 liter of cooking oil. Based on the methodology, in order to cook palaw for a family of four, we use 0.3 liters of cooking oil, 0.5 kg of onion, 1 kg of carrots, 0.6 kg of beef, 1 kg of rice, and 0.5 kg of flour in our formula. Please click here to learn more about the methodology of the Palaw Index.