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Wednesday, October 26, 2016

Russia has celebrated the two year anniversary of the food war with West

The food embargo imposed by Russia in retaliation for Western sanctions, is two years. Did it live good or bad? Rather, the second. The prices of many food products has grown considerably. Along with inflation, which also beat the records, this is the strongest hit to our wallets, but salaries remained at the pre-sanctions level. Many have to abandon the products that they allowed themselves before. “MK” has decided to sum up our food war with the West.

photo: Alex geldings

For a start we will remind, what products have touched the food embargo imposed by Russia on 6 August 2014 in relation to the EU and the USA. Under the sanctions were meat and dairy products, fish, vegetables, fruits and nuts.

The total annual volume of trade embargo in this sector was estimated at $9 billion According to the plan, this step was to allow domestic farmers to increase its share in the domestic market. Two years later, it became apparent that import substitution works everywhere, which caused a significant increase in food prices in 2014-2015. Let’s start in order.

Meat starvation

Meat in Russia is lower than before the introduction of retaliatory sanctions. According to the Institute for agricultural market studies, the capacity of the meat market in Russia in 2015 decreased by 1.6%. However, the rate of contraction of the market slowed down in 2014, the decrease was 2.8%. But this year, the meat market could fall by half more than in the previous two years, by 5%. It’s not weird. Prices for meat products are growing. However, in commercial networks, focused on the poor, it often goes unnoticed — 2-3% since the beginning of the year, but in stores for the middle class growth is 15-20% higher. Beef exceeded 500-550 rubles, pork is trading at 350-400 rubles, chickens — at 100-180 rubles. The Ministry of economic development, in General, two years of sanctions meat on average has become more expensive by 10%, which is quite digestible, but independent experts are pessimistic — they give a figure of 40%.

In this sector there are positive and negative points. For the first half of 2016, the volume of beef production in Russia grew by 6.2%, pork — by 15.7%, poultry — by 5.8%.

At first glance, the situation stabilized, despite the embargo of meat (taking into account falling demand) enough, even the export, for example to Serbia. Developing links with Japan. According to the National meat Association, meat export in 2015, increased from 77 to 85 thousand tons.

But why, then, grows and imports? According to the FCS, from 1 January to 3 July 2016 procurement of poultry meat abroad increased by 3.2%, and pork by as much as 17%. While approximately the same amount of increased domestic production of this meat.

The answer is simple. As told “MK” the General Director of one of the large meat processing plants (Rostov region), producers sell the meat abroad for dollars that will grow in value. Trading network, however, buy meat for the dollars, but they have a choice — they can increase the retail price. The population there is no choice, and you have to pay more.

Coordinate with vendors and producers of meat is impossible. So it is a vicious circle.

Fish is looking for where it is deeper

The situation with seafood in Russia after the imposition of sanctions is also ambiguous. For 2009-2015, their sales in our country increased annually on average by 14%. In 2015, the Russian enterprises sold this product in the amount of 600 billion rubles.

Note that due to the food embargo stopped the supply of fish from Finland, Norway and France. Russian producers increased their production volumes. In 2009 in Russia fish and seafood they sold 3 billion rubles, by the end of 2015, this amounted to twice as much. However, it was not salmon and trout, and less valuable fish, and the growth of sales was determined not only increased volume but also increased prices. According to Global Reach Consulting, in 2015, the retail price in Russia is salted herring, cleaned and portioned frozen fish increased by 30%. Certain types of fish rose by more than half.

Import substitution in this sphere is not valid. “From Norway we brought 100 tons of chilled salmon and 30 thousand tons of trout. Imported frozen fish. In total, the market volume of salmon exceeded 200 thousand tons, of which only 15 thousand of their own”, — said the representative of the fishing company.

Shipping fish from countries not subjected to retaliatory sanctions, such as the Faroe Islands and much more. Becoming unaffordable even simpler fish — Pollock, herring or cod. Of course, these fish can be found on the shelves for 150-200 rubles, but, as recognized experts, its quality leaves much to be desired. “Today, themselves cod fishermen may sell to the merchants for 200 rubles per kilo. So, in Central Russia, it can’t cost less than 350 rubles per neotrogena and 450 rubles for a filet. Fed us ersatz. Quality fish is sent abroad — it is more profitable to fishermen, during the fishing season the cost of transportation by rail grows in half”, — said the interlocutor of “MK”.

According to officials, the main reason that even with the rise in the fish prices are rising, whereas before the introduction of sanctions, they were relatively stable in performing discipline. According to the presidential envoy to FEFD Yuri Trutnev, “not fully developed mechanisms to stimulate investment in recycling, not execution of the equalization of tariffs for transportation, not an executed order to increase efficiency in the cultivation of mariculture. The President made the decision, and officials did not execute”.

To summarize, we can say that the embargo was the reason that the fish in our stores has increased in price by at least 40%, and its quality is deteriorated.

photo: Natalia Muslinkina

Drink, children, milk

For two years the embargo of milk and milk products rose by about 20%. Since the beginning of this year the milk has increased in price by 5.6%. But see, the fault is in this anti-sanctions? Because of the year prior to the embargo the milk has risen in price for 10%. Is it possible to assume that the current 20% in two years — is this normal? This is below the rate of inflation.

But experts immediately suggestive shadow on the assumption that so this is a product we are quite capable to self sufficiency. The relatively small growth of prices explain the low demand for milk around the world. According to the report of the Food and agriculture organization of the United Nations, the price index for milk and milk products is now the lowest in all previous years.

In this regard, and in Russia the prices for these products are growing slower. But too early to rejoice. On the one hand, according to Rosstat, in January–June of 2016, milk production increased by 2.4% (about the same amount in the year the production increased since the introduction of anti-sanctions).

But the fly in the ointment is still there. According to the FCS, since the beginning of the year increased the import of milk: skimmed — 3.7 times, dried whole — 6.1%. The previous two years show similar statistics. That is, domestic production is growing, but we drink milk made from foreign raw materials. And though it comes not from the EU, and for example, from Latin America, import substitution in this sector is not happening.

According to the head of the project “Russian cheese” Oleg Orphans, despite the fact that its products in the Russian market has become larger, it is still not enough. “To ensure the cheese domestic market, it should be from 5 thousand to 8 thousand independent productions. Now several hundred. Many would like to open your own business, but all depends on money. In Germany the creation of their own, including milk production loan under 1% which can be paid back in 20 years. What rates and what interest we have, everyone knows. In such circumstances, to stand up is impossible,” — said Oleg Orphan.

And on stones trees grow

As shown by the data of Rosstat, during the embargo of fruits and vegetables has risen more than 30%. Particularly significant growth in prices — about half of the total figure — we saw since the beginning of this year. It is quite understandable. Until 2016 a significant share in the Russian market was occupied by Turkish products. Then on the fruits and vegetables from Azerbaijan, Belarus, Morocco, Iran, Israel. Almost 70% (two-thirds of all fruit) came from abroad. The main reason for the price rise associated with the fall of the ruble. The spring also increased purchase prices. The difficult economic situation is not slow to take advantage of the trade network and increased margin.

However, the fruit and vegetable sector to a great extent depends on the season. In the spring and summer, when the market of domestic farmers, prices fall (the price of vegetables in recent months, fell by 1.5%). In winter, when the products of Russian producers comes to an end, to eat the same apples, you have to pay more.

Some breakthroughs there. Thus, the number of greenhouses where cucumbers are grown, has increased significantly. Now these vegetables we are able to close their own needs.

But some cucumber can not eat. We need more. Manufacturers complain about the lack of storage facilities where produce could be stored until the next harvest. A few of them. Add to this transport component. Says the head of the Tambov company for the production of potatoes, “in addition to many national retail chains have to secure a guarantee that the potatoes on his counter at any time of the year. Delivery from Russia can result in crop failure. That carry Israeli or Turkish potatoes through Belarus, which increases the price. The same can be said about other fruits and vegetables. In addition, we should not forget about corruption — the kickbacks that allow foreign suppliers to circumvent the Russian competitors”.

But hope for improvement in the agricultural sector exist. Russia has a state Program of agriculture development for 2013-2020, which contains measures to stimulate growth of production of key agricultural products and import substitution. According to the Ministry of agriculture, total agricultural support given the program in 2016 will total 237 billion rubles. However, on real projects implemented in previous years under this program, we heard infrequently. We believe that these billions will be help for our farmers.

Summing up

When lifting sanctions against Russia — is unknown. Someone claims that the end of the year, someone believes that is a long time.

According to analyst GK Forex Club Irina Rogova, “to fully take control of prices for food products the government is unlikely. It is necessary to act to curb inflation, to take measures to stimulate the real sector and supporting the farmers and food producers. In the case of uncontrolled growth of prices will need to step in and set some limit prices for socially important goods”.

Sanctions . Chronicle of events

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