Food prices soar in Russia after drought

25th August 2010, Comments 0 comments

Prices of basic foodstuffs like buckwheat and flour have soared in Russia over the past month as the effects of its worst ever drought hit supplies, statistics showed Wednesday.

Inflation in Russia was 0.2 percent for the week 17-23 August, considerably higher than the figure before the drought and the third week in a row that prices have risen by this amount, the state statistics office said.

Most alarmingly, the price of Russian staple buckwheat -- enjoyed by generations for breakfast or as an accompaniment to meat -- rose a very sharp 8.6 percent in the space of the week.

Flour prices rose 3.3 percent, while milk was up 1.3 percent. The price of bread, a crucial component of the Russian diet which is consumed with almost every meal, increased 0.9 percent.

The drought, caused by the hottest summer in Russia on record, destroyed one quarter of the country's crops and prompted the government to slap a highly controversial ban on grain exports to protect domestic supplies.

But consumers have already seen buckwheat and other goods disappearing from the shelves as demand outstrips supply, stoking inflation.

The government, nervous of the price rises causing social discontent, has already warned that it will clamp down on any merchants seeking to profit from the situation unfairly.

The federal anti-monopoly service said it has strengthened its controls on food markets and opened 25 probes into suspected cases of price abuse in August alone.

It said bread prices could rise by up to 15 percent by the beginning of September while milk in some regions had already gone up by 18 percent.

Before the drought, Russia was the world's number three exporter of wheat and its ban on grain exports drove global wheat prices to two year highs.

The government said Tuesday that inflation this year would now be higher than the previous estimate of 6.0-7.0 percent due to the drought.

"Inflation risks as a result of the drought have grown considerably," said Deputy Economic Development Minister Andrei Klepach.

Inflation in Russia, which reached levels that caused panic in the 1990s, has been on a steady decline in the last years, allowing the central bank to cut interest rates during the global economic crisis.

The agriculture ministry Wednesday confirmed that the harvest so far this year at around the halfway point was a third lower than levels a year earlier.

Farmers had harvested 41.5 million tonnes of grain, compared with 60.5 million tonnes, it said.

Russia has warned that its grain harvest this year will be just 60-65 million tonnes, compared to 97 million tonnes in 2009. Last year, Russia exported 21.4 million tonnes of grain abroad.

"The most acute problem is with buckwheat because last year's stock is not big and the forecasts are bad," said Mikhail Susov, corporate relations director of the X-5 Retail Group which owns the large Perekrestok supermarket chain.

"We have seen the wholesale price for buckwheat rise 40-60 percent. For milk there is a shortage of 25 percent. Suppliers have warned that this risks lasting until the end of the year," he said, according to Russian news agencies.

© 2010 AFP

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