Viral appetite – Newspaper Kommersant No. 2 (7203) from 11/01/2022

by time news

The cost of food last year increased by 28.1% on average, according to the Food and Agriculture Organization of the United Nations. The growth turned out to be the most significant in recent years – the rise in prices affected all major groups of agricultural products, not just grain and oil. Food inflation in the Russian Federation is apparently significantly lower than the world one, its role in the formation of inflationary expectations is higher.

Food prices at the end of last year increased by 28.1%, according to data from the Food and Agriculture Organization of the United Nations (FAO). The index averaged 125.7 points for the year, while at the end of December – 133.7 points, which is 0.9% less than in November, but still 23.1% higher than in December last year. FAO warns that given “high costs, ongoing pandemic and unclear climatic conditions”, the market is unlikely to stabilize this year either.

Cereal prices rose 27.2% over the year, to 131.2 points, the highest average annual rate since 2012, including the cost of corn and wheat increased by 44.1% and 31.3%, respectively, such an increase was associated not only with an increase in demand, but also with constraints on the supply side. Rice was the only crop whose value dropped by 4% over the year, as increased competition between producers offset the effect of rising transport costs. The highest growth was shown by vegetable oils and sugar. The sub-index of the cost of the former increased by 65.8%, to 164.8 points, this is a record price level for the average annual indicator. In December, the figure was 178.5 points, but this is 6.1 points (or 3.3%) less than in December. Sugar in the world last year rose in price by 37.5%, to 109.3 points, this is the highest value since 2016. The sub-index of dairy products for the year increased by 16.9%, to 119 points, here the rise in prices was facilitated by an increase in consumption and imports by Asian countries, in December the indicator increased by 2.3 points (1.8%), to 128.2 points. While the prices for meat in the world last year increased by 12.7%, to 107.6 points. Lamb has risen the most in price, followed by beef and chicken. In December, the cost of meat remained almost unchanged, amounting to 111.3 points.

The last such significant spike in prices occurred in 2011–2013, when the overall index reached 131.9 points, but the growth was associated primarily with the rise in grain prices. Now, not only fluctuations in demand have led to an increase, but also an increase in total costs for producers, including for energy and transportation, last September, the cost of freight exceeded the indicators before the pandemic by six to seven times, according to Euler Hermes. Difficulties with the wheat harvest, as well as centralized purchases in reserves, also became a significant factor.

In Russia, food products for the year rose by 10.62% against the background of a decrease in agricultural production last year, according to the Ministry of Agriculture, by 2% for the first time since 2018. In total, according to Rosstat, the annual inflation in the Russian Federation in 2021 amounted to 8.39%, non-food products rose by 8.58% (prices for services grew below the general inflation). A direct comparison of food inflation in FAO and in the Russian Federation is impossible, but it looks below the world average in Russia, while the Central Bank of the Russian Federation notes that it was food that made the main contribution to the accelerated growth of retail prices in Russia in 2021. In addition, “most of the deviation of annual inflation from 4% falls on eight large commodity groups: fruits and vegetables, eggs, dairy, meat, fish products, grain products (bread, pasta, cereals), furniture and building materials, cars”, noted in the regulator’s inflation review for November 2021. The Central Bank explained the rapid rise in food prices by the growing costs of producers in agriculture and the food industry (for basic raw materials and materials, transportation, packaging) and the rise in world food prices.

Analysts have always noted that the rapid rise in food prices has a particularly negative impact on the perception of inflation by households and their inflationary expectations. As the head of the Central Bank Elvira Nabiullina said earlier, the indicator for the year will largely depend on what will happen in agriculture. In December, compared with November, food prices went up, according to the Federal State Statistics Service, by 1.36% against 1.3% and 2.4% in the previous two months. According to the December polls by the Central Bank, agricultural companies expected the most significant price increases in the next three months.

Tatiana Edovina, Alexey Shapovalov

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