Fight against the shadow: why food prices are rising in the country and can it be stopped

Daria Voznesenskaya

Problems with rising food prices are especially noticeable in the face of falling incomes of Russians due to the coronavirus pandemic. In many regions, prices began to rise in late summer and early autumn. According to Rosstat, the price of granulated sugar since the beginning of the year has increased by 71.5%, sunflower oil - by 23.7%, macaroni - by 10.5%, bread - by 6.3%. However, at the federal level, this problem was raised only in December.

So, on December 9, at a meeting with members of the government, Russian President Vladimir Putin noted that many citizens may simply not have enough money to buy more expensive food. He urged not to allow a situation like in the USSR, when they said: "The Soviet Union has everything, but not everyone has enough". A few days later, the head of state noted that the rise in food prices was due to economic reasons and had nothing to do with the coronavirus pandemic and the level of production. “People are limiting themselves because they have no money for basic food. Where, where are you looking? This is the question! This is no joke”, - he said, addressing the ministers.

The Cabinet was given a week to stabilize the situation. In many regions, during this time, it was possible to reduce prices for a number of food products. This happened, in particular, after Russian Prime Minister Mikhail Mishustin signed a number of decrees, according to which, among other things, tariff quotas for the export of wheat, rye, barley and corn were established, as well as government subsidies for flour producers. In addition, the authorities will now be able to regulate prices for socially important products if they increase by more than 10% in a month. At the same time, prices for sunflower oil and sugar were fixed.

However, let's return to what happened in the regions earlier. So, for example, in Rostov, the rise in food prices compared to the same period last year was 86.5%, writes RostovGazeta. The prices for beans and cereals soared the most.

Thus, the cost of buckwheat in Rostov increased by 86.5%. According to Lyubov Zheleznaya, director of PCF Mayak LLC, the price of buckwheat increased due to two factors: the rise in delivery prices and a shortage due to insufficient sowing. At the same time, legumes have become more expensive by 90%. “This is due to the crazy drought in the Rostov region. In addition, the price of diesel fuel, electricity went up, and hence the cost of production increased", - explained Zheleznaya.

Also in Rostov, the price of carrots (35.6%), sugar (27.1%), apples (22.9%), sunflower oil (14.6%), bread (7.5%) and wheat flour increased significantly (5.8%).

In the Nizhny Novgorod region for 11 months of this year, prices for granulated sugar have almost doubled, flour has risen by 19.5%, pasta - by 15.4%, sunflower oil - by 26.4%. The rise in prices in this region, according to NewsNN, exceeded the national average. On this fact, the OFAS in the Nizhny Novgorod region and the regional prosecutor's office have already begun checking.

At the same time, an increase in prices for vegetables and fruits was noted in the Primorsky Territory. So, cucumbers and tomatoes, according to economist Anton Gulevich, have risen in price due to a decrease in freight traffic between Primorye and China, as a result of which the supply of vegetables has decreased and the transport costs of carriers have increased. And the low harvest in the producing regions caused a rise in prices for vegetables of the "borsch set": potatoes, carrots, beets and onions, writes Vostok-Media. Fruit, according to the newspaper, rose in price due to the weakening of the ruble.

In the Omsk region, the highest prices for cucumbers (+ 55%), tomatoes (+ 36%), sunflower oil (+ 9.7%), potatoes (+ 6.8%), sugar (+ 6.3%) have risen the most since the beginning of the year , eggs (+ 5%) and fruits (+ 4 to 11%). At the same time, only cabbage dropped significantly in price - by 9.7%. Correspondents of the Gorod55 publication decided to check how the official statistics coincide with the real situation. For example, some of the cheapest apples in Lenta, which used to cost 60-70 rubles, can now be purchased for a promotion, but they are more expensive than 100 rubles per kg. Special offer tangerines can be bought for 360 rubles per kg. Sunflower oil costs 120-185 rubles, flour - 57-63 rubles, sugar - 59 rubles per kg.

Residents of the Volgograd region also noticed a significant rise in food prices. At the same time, according to the publication NovostiVolgograda, immediately after urgent orders from the government, networkers were sent new price tags - the cost of butter, sugar, bread decreased. Although the Volgograd shops presented this as a discount. Therefore, local residents fear that prices will increase again early next year.

Yuri Nersesyan, the head of the Communist Party faction in the Rostov City Duma, believes that the current situation with food prices is similar to the collusion of chains, since all of them experienced the same rise in prices. The situation is also aggravated against the backdrop of the closure of small businesses due to the pandemic: due to the lack of competition, the chains began to inflate prices, the deputy said.

However, the deputy head of the Volgograd OFAS, Alexander Velikanov, recalled that the price of products is formed not only by the retail network. Pricing is a complex and multi-stage process. The cost of goods in a supermarket depends not only on the chain's markups, but also on the manufacturer's expenses and the activity of dealers. “The network is only the final link in this chain, so it is rather difficult to consider the issues of price increases”, - Velikanov noted.

The head of the Union of Independent Chains of Russia, the owner of the Pobeda chain Dmitry Shadrin associates the rise in food prices with the ruble exchange rate and seasonal factors. “In the second half of the year, our own harvest comes to an end, imported products enter the market, and we see what is happening with the ruble exchange rate”, - he stressed. Shadrin advised consumers not to stockpile food, creating a hype for them. According to him, the rush demand is an uncontrollable factor that the Russian government has never coped with.

“The rise in prices for essential goods may indicate that their producers are preparing in advance for a decrease in the margins of their business, which is primarily associated with an increase in taxes. In addition, low competition at all levels - production, wholesale and retail - increases the risk of price manipulation by the leading market players”, - writes Novosti Volgograda.

At the same time, Omsk retailers do not see anything critical in price increases. “These are common ideas. A person comes to the store and sees that the price of one product has risen. And when she goes down, he doesn't notice it. And statistics counts everything", - said Viktor Shkurenko, owner of the Shkurenko Trading House.

State regulation affected only two products - sugar and sunflower oil. Retaining their growth is not so difficult, and this will not significantly affect the market, retailers say. “These are non-economic measures, but we estimate that we will be able to set the recommended prices for these two products. They put pressure on us, I do not hide, but they promise us that the selling price at the manufacturing plants will also decrease for us”, - Shkurenko said.

He believes that the situation around prices is exalted by the statements of the authorities, and a wide discussion around these products is more a political speculation than an economic problem. “From time to time there is such a surge in the attention of government agencies to prices. Now we are experiencing another such surge, then everything will return to normal. When the state begins to pay increased attention to prices, then the rush demand begins”, - Shadrin agrees with him.

At the same time, the experts interviewed see the negative consequences of the administrative regulation of food prices. Thus, economist Oleg Roy believes that this will lead to an even greater rise in prices in the future. According to him, it is better to influence the situation by economic measures, for example, by raising customs duties, or by using other barriers to exports. Roy also noted that it is easy to overdo it with protectionism. There is always a risk that producers, who are discouraged from trading at world prices, will simply reduce domestic production in order not to operate at a loss. In addition, the economist recalled anti-sanctions, which increase the price of many goods due to the lack of cheaper imported analogues.

“The government’s plans to freeze prices have confused many economists: experts believe that in the long term, this approach can lead to a shortage of certain products and an increase in prices for other goods. In the short term, there is not much sense in freezing either - after regulation stops, prices will catch up with inflation and rise again", - the journalists of the Nash Gorod (Our City) newspaper concluded.

Economist Viktor Molokanov also agrees that price fixing is a populist measure. “Never and nowhere has it led to the fact that those goods, prices for which were fixed, became more accessible. Such a product either disappears from sale or its quality deteriorates”, - he says. The expert believes that regulation may also lead to a decrease in the volume of sunflower oil, and sugar will begin to be refined worse.

"When the state begins to regulate prices, it is no longer a market economy, and in the end everything comes to coupons and distribution", - added Molokanov.

Any restrictions on the retail value of goods force manufacturers to reduce costs, that is, to use the worst raw materials, "conjure" with the volume of containers, and use surrogates. In such conditions, the share of counterfeit products on the store shelves will increase, and the poor will finally switch to eating expired products sold “on special offers”, according to Novosti Volgograda.

“It is no coincidence that prices for bread, butter and sugar have grown critically - there is nowhere to reduce the quality, there is nothing to replace raw materials with low-quality ones: they either do not exist, or are already in operation - no one is going to trade at a loss. The Ministry of Economic Development is going to equalize prices at the level of retailers and introduce protective duties on exports - there is no talk of any real investment support. Under pressure from retailers, manufacturers will lower prices at the expense of quality, and ministers will write down this victory at their own expense”, - Nezygar believes.