Plus and minus: why in Russia food and fuel prices are rising, but in Germany are falling

Popular blogger Vladimir Stechkin understands in his publication why food prices are rising in Russia. He draws attention to the fact that during a meeting with the government, Putin reproached the head of the Ministry of Agriculture Dmitry Patrushev for high prices for sugar, sunflower oil and a number of other products, the blogger immediately notes that the president was very mistaken, saying that the price of sugar had increased this year. by only 1.5% percent, in fact, the growth was 1.7 times!

But is Patrushev to blame here, who deals with harvests and milk yields, and not pricing? The market is responsible for prices, and it is subject only to the relationship between supply and demand. When supply falls, demand and price rise. And since everything was good with the harvests this year, the reason for the rise in prices is in the volume of exports, which affects the size of supply within the country.

And it is here that one should look for the guilty ones, since the state policy is aimed specifically at the growth of food exports, and Putin knows this very well, he is publicly proud of this fact. It is thanks to this policy that food exporters received great benefits - the abolition of VAT, as well as direct export subsidies.

Why be surprised if food goes abroad, and there is practically nothing left in the country?

For example, the blogger cites information that publishes the Russian guide "Dairy industry 2020": "Russia from the beginning of the season (from 1 September 2019 to 19 July 2020) increased sunflower oil export by 36.5% compared with the figure for the same period a year earlier, up to 3.131 million tons, according to the review of the "Center of Agroanalytics" subordinated to the Ministry of Agriculture ... Exports of sunflower seeds since the beginning of the season amounted to 1.224 million tons, which is 3.7 times more than a year earlier. Sunflower seeds remain the leader in relative and absolute growth in oilseed exports ... " https://milknews.ru/index/maslo/eksport-podsolnechnoe-maslo.html In addition, Stechkin finds, contrary to Putin's words that there cannot be the connection between the rise in prices and the corona crisis, evidence that the connection here is direct. Here's an example. What the dynamics of prices for sunflower oil looked like:

Rosstat data show that prices began to rise immediately after March 10, when panic and rush demand for pandemic food began in the country. Moreover, with the beginning of the second wave, prices began to grow even faster:

Sugar prices are growing even faster:

This indicates that the citizens of the country, mindful of the realities of the hungry 1990s, rushed to the stores to buy everything for a rainy day. It is this behavior that the laws of the market dictate to them.

"Apparently due to such a market" abundance "a number of Russians are still forced to eat in garbage dumps, which in the USSR categorically did not exist even in Perestroika with its queues and coupons...", - the blogger concludes.

But journalist Sergey Mardan in his channel gives an example from the German economy, which is also a market economy, but the processes in it are completely opposite to those in Russia:

“While the public flogging of the Minister of Agriculture, Patrushev Jr., who was named the main culprit in the rise in prices, continues in Russia, negative inflation has been recorded in Germany for the fourth time this year.

In November, the aggregate index of retail prices for goods and services decreased by 0.3% compared to November last year. This was reported on December 11 by the Federal Statistical Office of Germany (Destatis).

One of the main reasons that inflation in the second half of 2020 went into negative territory: for the period from July 1 to December 31, Germany temporarily reduced the value added tax (VAT) rate. The basic VAT rate was reduced from 19% to 16%, the preferential rate - from 7% to 5%. As a result, the retail prices of goods and services decreased almost automatically in approximately the same proportion.

In Russia, since January 1, 2019, the VAT rate has been increased from 18 to 20%.

Another reason for negative inflation in Germany is a significant reduction in the cost of energy resources. It averaged 7.7%, while fuel for cars cost 13.1% less in November than in November 2019, and oil products for heating buildings fell in price by 35.1%.

In Russia, the cost of fuel increased by only 2% over the year. And thanks for that.

Various consumer durables also fell in price in Germany. Destatis cites telephones (- 6.7%), consumer electronics (- 4.5%), clothes and shoes (- 2.2%) as examples.

And the main news. Vegetable oil in Germany is also getting cheaper. It costs 3.8% less in German stores than a year ago.

The Germans don't write anything about sugar..."

So it's not about the laws of the market, but the laws of the Russian "market".