Analysts predict plenty of grain crops this year but that will not make bread any cheaper. On the contrary, there are predictions of a further growth of bread prices. Traders and electric power tariffs are to blame
Export duties on wheat, rhy-wheat mixture and barley that existed since November 12 2007, have been abolished as of July 1. The tariffs were in fact prohibitional and had been introduced to stabilize the situation at the domestic market when grain crop prices were skyrocketing to record high levels.
According to Nikolai Demianov, Department Head of the International Grain Crops Company, the cancellation of the duty is only logical on the eve of the predicted high crop yield. “We predicted earlier that the overall grain crop yield would reach 90 million metric tons but we cannot rule out the possibility of reconsidering our forcast towards a bigger number,” he remarked.
The Ministry of Agriculture is more reserved in its assessment: the overall amount is expected to be 85 million metric tons, 50 of which will be wheat (three million more than last year; while grain crop elevators stocked about 11.5 million tons as of June 1.)
Experts link the growing grain crop yields with last year’s record high prices of grain crops (a bushel of wheat cost twelve US dollars in February) which urged investors to assign money to agricultural production and developing new agricultural territories.
Therefore, Russia’s bureaucrats are not worried that this country will remain without bread and grain crops. Besides, Exports will not be very high either. There are several reasons to that: first, grain crop prices are going down the world over, and second, Russia still experiences a shortage in transportation facilities.
There are predictions that exports will not exceed 19 million metric tons at the most.
It turns out that the remaining 70 million tons (or even more than that) will reach the domestic market and, consequently, will reduce or at least slow down bread prices. However, that is only in theory. In practice, experts say the prices will not go down. “The consumer prices of bread live their own lives. As of May, the wholesale prices of flour dropped, but the retail prices remained intact. That is the reflection of the problem of relationships between the government and the trade,” Vice President of Russia’s Grain Crops Union Alexander Corbut says.
Prices of bread are likely to grow in any case because the lion’s share of the price of bread is composed of expensive electric power, transportation, and commercial markups of manufacturers and retailers. The amount of grain crops in Russia’s elevators will thus render no influence on the economic efficiency of the domestic bakery industry.
Yekaterina Shokhina
Illustration: lizazhitskaya.com
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