Oct 15, 2021
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Prices up: half of Russia will eat bread and water

Prices up: half of Russia will eat bread and water

Photo: Egor Aleev / TASS

No sooner had the suffering end in the fields than the buyers of the food began to suffer. Harvesting was another reason to raise prices. The World Food Organization (FAO) publishes a consolidated price index for staple food items every month. These are mainly food raw materials: wheat, sugar, palm oil, as well as meat and milk. Last September, this indicator increased by 1.2% and reached 130 points.

A little more than a percent per month is not a lot. And FAO wouldn’t worry. But since last September, the average value of the index has grown by a third. In general, food prices in 2021 set their maximum since 2011. And this is already a reason to think.

Wheat on the global market in September alone rose by 4%. And over the past 12 months, the main grain has increased in price by 41%. FAO Senior Economist Abdulrez Abbassian does not exclude that wheat will grow in price for several more weeks:

“The focus will be on wheat over the next few weeks to see if skyrocketing prices can curb demand. It turns out that instead of grain, people will be shown high prices, and they will be satisfied with them. It’s hard to believe. In Europe, gas prices have been exorbitant for several weeks. And they only warm the pockets of stock speculators …

By the way, both crises – energy and grain – have one possible reason. The dry summer resulted in a low harvest and insignificant exports from the main wheat producing countries, FAO experts explain the situation. Russian wheat did not make it to the world market this year. The crop turned out to be small, and all of it was sold out by the neighboring countries, explains Dmitry Leonov, Deputy Chairman of the Board of Rusprodsoyuz:

– Due to protracted sowing, severe droughts in the Center, the Volga region and the Urals, we received a new crop, which traditionally lowers retail prices, we received later. Weather events, a decrease in harvest, a high demand for local processors, as well as a poor harvest of grain in Kazakhstan and Central Asia and an active demand for Russian grain on their part caused an increase in wheat prices this year …

Wheat is the main feed for livestock. An increase in its value in the future may lead to an increase in meat prices. Over the past year, the FAO meat index has increased by a quarter. Beef and lamb have risen in price in the world – due to the reduction in supply. At the same time, pork and poultry meat fell in price. In Russia, poultry meat has become an exception. Not from the diet yet. But chicken prices have grown wings. And there is a reason for this in our country, says Dmitry Leonov:

– The rise in the cost of feed, the lack of hatching eggs, outbreaks of bird flu have led to an imbalance in supply and demand for chicken meat, and as a result to an increase in prices for it …

On vegetables this fall, who just did not walk. In September, they were the most expensive. The most overripe in terms of rubles were tomatoes and cucumbers. Agrarians point here to a whole bunch of factors that inflated the cost of vegetables. First of all, it’s bad weather. More precisely, early frosts, due to which the main vegetable growers had to turn on the heating in Russian greenhouses earlier. And include heating bills in the price tags. Not everything went smoothly with the vegetables in the open field either, Leonov explains:

– A late sowing campaign, a slight reduction in acreage for vegetables due to their low profitability, a lag in harvesting and a shortage of workers, all this provoked an increase in prices for the vegetable group this year …

Milky shores stand somewhat apart. Their products in the world markets have increased in price by only 15% over the year. But last September, the price went up by 1.5% at once. According to FAO experts, milk prices are supporting dwindling stocks and limited production. All over the world, milk rarely leaves farms. It is drunk by locals or processed into fermented milk products and cheeses. In Russia, prices for milk rose by only 4.7% over the year. Of the products, only alcohol has a lower growth rate – 2.2% yoy. But milk, like bread, is a social and strategic product. Domestic producers sometimes do not risk releasing prices for it. The branch union does not speak directly about this. Despite the fact that the cost of milk surpasses the selling prices, states Alexey Voronin, Director of the Analytical Department of Soyuzmolok:

– The cost of milk production in August 2021 exceeded the level of the same period in 2020, according to preliminary estimates, by 15.9%. The growth in prime cost was facilitated by the rise in the cost of feed and mineral fertilizers, the devaluation of the ruble, inflationary processes …

At the same time, the inability to raise milk prices is already forcing some producers to suspend its production. For eight months of this year, milk yield has practically not increased in Russia, says Alexei Voronin:

– This was a consequence of a decrease in production by a number of the largest milk producers against the background of a serious increase in production costs. In addition, the rise in prices for feed has led to a reduction in the cost (and even impoverishment, – ed.) Of the ration of animals. And this, in turn, led to a decrease in productivity. As a result, the drop in profitability caused a number of manufacturers, mainly small ones, to leave the industry …

For dessert, we have the highest scores in the FAO food indices. Sugar in global markets has grown by one and a half times over the year. FAO experts explain this by the fact that Brazil – the world’s largest exporter of cane sugar – has contacted biofuels. And high ethanol prices lured suppliers of raw materials from food to the energy market. Last September, sugar rose in price by only half a percent. Mainly because of the good news from the plantations of India and Thailand. A good harvest of sugarcane is expected there. And they don’t care about ethanol yet.

Palm oil has become the record holder for the rise in food prices in the world. In global markets, it has risen in price by 60% in 12 months. And it has already broken the 2011 record. The reason is simple – there is simply no one to extract oil. Due to the pandemic, the influx of labor migrants to the main producing countries, such as Malaysia, has dropped.

In Russia, it seems, and palm trees do not grow. And sugar – its own beetroot – is not sent to gas stations in large quantities. But he catches his breath early. The global factors that hit the palm trees at the equator also operate in Russia, Dmitry Leonov explains the situation:

– Associated costs traditionally affect the cost of products. This is the cost of logistics, packaging, feed, fertilizer and so on. For most of these factors, this year we have seen an increase, which influenced the prices of products. Freight transportation on average rose by 15-20% per year. The logistics situation continues to be difficult due to a shortage of a fleet of vehicles, drivers, and a rise in prices for fuels and lubricants. Since the fall of last year, all packaging has risen in price: from stretch film to pallets. The latter, according to our data, have increased in price by more than 100% since the beginning of the year. The pandemic also continues to affect food production. Because of it, in some industries, for example, in crop production, there is a shortage of labor.

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