Food prices may outpace inflation in Russia. Agricultural production in the first nine months of this year decreased by 3.3 percent compared to the same period last year, the Federal State Statistics Service reported. As a result, food prices may rise slightly faster than inflation, experts say.
Most of all, grain harvest indicators have decreased. In the middle of October, only 101 million tons of grains were harvested. This is almost 20 percent less than last year. Sugar beet also collected less by almost 13 percent. Potato production fell by almost one percent and vegetables – by 3.8 percent.
It seems to be a good situation in animal husbandry. Meat of farm animals and poultry in live weight produced 3.3 percent more. Here is just the number of cattle in farms at the end of September decreased by almost one percent, and poultry – by 1.6 percent.
The production of grain, sugar beet, other vegetables, potatoes decreased due to the weather. In addition, grain, sugar, vegetable oil are exported. In foreign markets, prices are rising, so they can jump inside the country.
The price of food is also affected by the situation inside the country. For example, against the backdrop of record yields in 2016 and 2017, prices for buckwheat in the country have declined markedly. But the producers were not ready to sell buckwheat at the new cost and reduced its crops. As a result, buckwheat will be harvested less this year, so next year prices for cereals may rise. It is also possible to increase the price of wheat. Since the beginning of the year, this cereal has already risen by 40 percent. But the cost of rice for Russian consumers will depend on the new crop and world market conditions. Prices for meat products are also raised. “The cost of poultry meat production has already increased by 10-12 percent lately. Probably, there will be a compensatory increase in prices due to the rise in price for feed,” said Albert Davleyev, vice president of the International Poultry Development Program (UIPDP). But the increase in the cost of chicken in retail will be constrained by retail chains, so as not to lose buyers. So in the end, prices can rise by 4-5 percent, the expert adds. “There is a general background inflation and cost inflation. It forces producers and sellers to constantly strive to increase product prices. But the limiter is the effective demand of the population,” notes Leonid Kholod. As a result, agricultural production is restructured.
Unprofitable enterprises are leaving the market. “Over the past year and a half, quite a few small poultry farms have closed, especially in those regions where there is no feed of their own. It becomes very expensive to deliver feed,” says Albert Davleyev. But the remaining large enterprises increase the weight gain and yield, that is, they work more efficiently, he adds.
We still have significant potential to increase food consumption, says Leonid Kholod. Production will increase with increasing incomes of the population. And in order to restrain the growth of food prices in the country, it is necessary to build more vegetable temporary warehouses, convenient transport routes and enterprises for processing agricultural products.