Prices in Russia did not go away for the New Year holidays — as reported on January 12 by the Ministry of Economic Development, they continue to grow. From January 1 to January 10, Rosstat's basket of goods and services went up by 0.56%. CPI up 8.61% year-on-year (highest since January 2016).
Photo: RIA Novosti
“In our opinion, we have passed this peak of inflation … Starting this year, we have brought the budget policy in line with the normal level, we have no additional budgetary incentives to warm up the economy,” Finance Minister Anton Siluanov said on January 14, during his interview on Gaidar Forum. “The monetary authorities, let’s say so, are taking steps to overcome inflationary pressure,” he added.
I must say, throughout 2021, the relevant authorities have already said that inflation has peaked, and it will be better further .
At the time of adoption, the draft budget of the Russian Federation for 2021 included inflation of 3.7% in the baseline scenario and 3.5% in the conservative one. The Central Bank predicted the same amount at the beginning of the year.
In the spring of 2021, when the consumer price index rose by 5.8%, the Minister of Economic Development said that inflation was at its maximum. In May, the authorities noted that inflation «has reached a plateau» and will decline to the projected 4.3%. In July — that the slowdown in price growth has already begun. As a result, annual inflation in 2021 amounted to 8.4% (the highest since 2016).
FAS is authorized to declare
It cannot be said that this situation did not bother the authorities.
On the same day, when Rosstat announced another inflationary record, the largest retailers sent a proposal to the Federal Antimonopoly Service (FAS) to introduce voluntary limits on the trade «margin», on goods that form the basis of the consumer basket of the poor.
The maximum markup on a set of borscht vegetables, pasta, bread and buckwheat will be 10%, X5 Group said in a statement. The restriction will be in effect throughout 2022.
Vegetables have greatly increased in price over the year — carrots have risen in price by 32.7%, onions — by 16.1%; potatoes — by 57.3%, and cabbage — by 139.1%.
Borscht will be more expensive with meat — pork has risen in price by 15.7% over the year, beef — by 14.9%, chicken by 26.8%.
However, you can cook vermicelli (over the year it has risen in price by 15%) and buckwheat porridge (plus 27.5%). Bread has risen in price by 10.7% since last January.
Magnit promised to limit the markup by about 200 commodity items. This is the same vermicelli, vegetables for borscht, bread, milk, butter, buckwheat (in 2021, butter became more expensive by 13.3%, milk — by 10.9%).
The FAS stated that that the sellers are acting on her instructions. “The FAS recommended that the largest retail chains limit margins on individual items within each of the categories of such goods and ensure their availability in retail facilities in sufficient volume,” the agency said in a release.
33 rubles for pocket expenses
However, to buy even at “frozen prices”, you need money. Therefore, the government received an instruction that is not discussed — to index pensions above inflation. “Now it (inflation — ed.) looks like 8.4%. By 8.6%, with a small gap, because there are no final inflation figures yet,” President Putin told government members on Wednesday.
In 2021, the average insurance pension in Russia was 16,296 rubles. Indexing by 8.6% means an increase of 1,401 rubles, with which the pension will reach 17,967 rubles.
8.6% minus 8.4% is equal to 0.2% — that is, «in real money» an increase «over inflation” will amount to 33 rubles. As for the social pension (the amount of which in 2021 was 10,076 rubles), the additional indexation will increase it by 846 rubles. The real allowance “above inflation” will be 20 rubles.
It seems that the Russian authorities consider the pension solely as a monetary expression of the minimum food ration, which they really undertake to give out to those who have reached a certain age.
Hence the idea to increase this monetary expression a little, and lay the responsibility for food security of the pension on sellers. The latter, of course, will fulfill the order, only transferring the costs to the prices of other products that those who have not yet lived to retire will buy.
Russian food is worth its weight in gold
The problem is, that the retailers are not responsible for rising food prices. And not even on «external factors».
In the newest study «On the reasons for the growth of consumer food prices in Russia against the backdrop of a rapid rise in world prices,» scientists from the Ural State Economic University analyze these reasons in detail.
For example, researchers refute the myth that price increases on products in the Russian Federation is determined solely by external factors.
If we compare the growth rate of Russian consumer food prices from January 2020 to February 2021 with the EU countries (based on Rosstat data), then
it turns out that prices in Russia are growing faster than in countries The European Union.
Thus, the Russian food price index rose by 8.2% over the year, and the same European indicator — by 1.1%.
In addition, the authors of the study write, prices in the Russian market for poultry meat, sugar, and tea are significantly higher than world prices. For example, “2 times for poultry meat, 1.6 times for sugar. For pork, fish, milk, wheat, prices on the Russian (external) market practically correspond to prices on world markets. But for such types of products as beef, butter and sunflower oil, Russian prices are much lower than world prices.”
However, there are nuances here. If we take into account the different purchasing power of currencies in different countries, it turns out that Russian consumer prices for food are significantly higher than consumer prices in the USA, Germany, and China for almost all types of food.
Thus, in the US, consumer prices are lower than in Russia, for example, for milk, almost 3 times, beef and eggs 1.8 times, chicken fillet by 1/3, and only potatoes and apples in the US are higher than Russian prices.
In Germany, all food prices are much lower than in Russia. The picture is similar for food prices in China, except for the price of milk.
Therefore, the current increase in retail prices in Russia is more sensitive to domestic consumers, and to a greater extent affects the level of well-being of Russians, in comparison with other countries, economists conclude.
Inflation beneficiaries
But who sets these high prices?
The one who controls the Russian food market. The authors of the study note that more than 50% of the total revenue of all agricultural organizations comes from agricultural holdings. The share of agricultural holdings in the production of poultry meat is 61.5%, pork — 59.3%, sugar beet — 59.4%.
Photo: RIA Novosti
Monopoly in the Russian agro-food market for food products produced by agricultural holdings leads to a significant increase in consumer prices for such products, scientists write.
Over the past 10 years, the share of agricultural holdings in the total revenue of agricultural producers has doubled, in profit — 3 times. Agricultural holdings control 41.3 million hectares of farmland. This is one third of the total area of all agricultural land. The leader in the ranking of the largest agricultural holdings — latifundists of Russia in 2020 was ABH Miratorg, the largest Russian meat producer. The second position is occupied by Prodimex Group, the main producer of Russian sugar. The top three leaders of the Top 10 are closed by JSC «Agrocomplex» named after. N.I. Tkacheva.
Agricultural holdings operate in symbiosis with large retailers. In the total volume of retail grocery trade in the Russian Federation, the share of food trade turnover of retail chains in 2020 amounted to 44%. In 2011, this share was 21.8%. That is, for 9 years, retail chains have increased the share of sales by 2 times. The sales volume of the ten largest network food retailers exceeds 5 trillion rubles. This is more than a third of the total food retail turnover in Russia.
What helped Russian agricultural holdings become monopolists? State aid plus food embargo.
The study «Non-tariff regulation of imports of products and food security of Russia» states that the embargo really contributed to the strengthening of the food independence of the Russian Federation, but for the only type of food — meat.
As for grain, fish, potatoes, sugar, vegetable butter, then the threshold level of food independence for these types of food was achieved even before 2014.
But for other types (milk, vegetables and melons, fruits and berries, edible salt), it was not reached. Moreover, self-sufficiency has hardly changed.
On the other hand, the introduction of the food embargo led to increased monopolization of the market, higher prices, and a decrease in the quality and assortment of food products.
With food security, it turned out to be ridiculous in general: “as a result of the application of the food embargo, three of the four comprehensive assessment indicators of food security decreased … the economic and physical accessibility of food for the population and the compliance of food products with the requirements of the EAEU legislation on technical regulation.”
In other words, if the Russian authorities were faced with the task of achieving the country's ability to provide itself with high-quality and cheap food, then it failed — in accordance with precisely the criteria that the government introduced.
A market without competition < p>The embargo could have had a positive effect if the domestic market had not been monopolized by large agricultural holdings and large retail chains, economists conclude
But that is precisely why the idea of introducing special food cards in the Russian Federation, as an analogue of the American “food stamps” — which can only buy food, will not give any effect. In the US, these «cards» solve two problems. Look, the authorities tell a person that you don’t save on food, we give you “vouchers”, and then you will have more “real money” that you will spend on something else. There is social support and support for the economy as a whole, and not just the food market.
Photo: RIA Novosti
This scheme «works» only if you have a highly competitive food market — many producers, many products.
There is no such market in Russia. Under these conditions, the distribution of “food money” will not create any motivation for the owners of agribusiness to increase production — they will simply raise prices, and everyone who does not receive cards will pay a little more.
So we can say that the task is “ to ensure the availability of food” is not actually set by the authorities.
They set and carry out another task, which, by the way, the USSR could not solve —
to provide the nuclear power electorate with food rations — enough so that people never experience hunger, but also do not have an extra penny for anything other than meeting the most basic needs.
It used to be that Russian companies made money on the growth of people's incomes, now they have learned to make money on falling incomes. Inflation is quickly digging a trench between the «two economies of the Russian Federation» — in one economy, people count money in front of supermarket shelves — in another economy, they can afford everything. In this situation, agricultural corporations have no motivation to “reduce prices” or “increase production” — the rich do not pay attention to rising prices, no one asks the poor. But let's say the authorities really want to curb inflation. Why don't prices (or rather, those who set them) listen to the minister's forecasts and orders?
People and ministers assess price increases differently. Officials look at the conditional inflation rate, which equally takes into account both positive and negative price fluctuations. People look at how their check in the supermarket changes.
Which of these indicators — «ministerial» or «human» — is more important for the economy? It looks like «human».