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Food Shortage to Hit Russia This Fall

23.05.2003
 

Prices for meat and bread to jump before parliamentary elections in Russia
There is a negative tendency for the price of bread price to go up and meat imports is speedily increasing in the country. A year ago, Russian Agriculture Minister Alexey Gordeyev had no idea what to do with the surplus of grain because of the record harvest and even considered resigning. But now it seems that the entire RF Agriculture Ministry is preoccupied with the problem of avoiding hunger this autumn. Russia's food security is under a serious threat on the eve of parliamentary and presidential elections.

The other day, Agriculture Minister Alexey Gordeyev held a governmental meeting to solve the problem of still increasing prices for bread. A sudden rise in prices for baked goods is reported from different parts of the country, which seriously troubles the government.

Last year's grain harvest was a record high: agricultural producers harvested 86 million tons of grain. Then the Agriculture Ministry proudly declared that the record of 1913 had thus been broken. Russia was overstocked with grain and the grain price started to fall. But it took a lot of time for the government and the ministry to decide what to do with the unexpected grain surplus. Alexey Gordeyev insisted that the government buy up the grain surplus on the domestic market and sell it abroad. Finally, the government ventured to make such moves within the period of November 2002–January 2003. However, the measures were no longer effective: Russian farmers were already on the verge of bankruptcy and were up to their ears in debt.

The Agrofact new agency reports that, in the two after since beginning of the governmental interventions, the price of 1 ton of grain went up by 300 rubles in Russia on average (14-15%). In the end, the price for 1 ton of 3rd class wheat went up to 2,300 rubles.

It looks like bread will be worth its weight in gold by autumn in Russia. Price worries of this kind are like the 1933 Reichstag fire for the Russian authorities on the eve of forthcoming elections. As the electorate of the Communist Party mostly consists of people living from hand to mouth, we can imagine how the ratings of Russia's leftist parties and associations may go up. Will the agriculture minister be able to solve this serious problem before the elections? This is possible only if the Central Bank will provide him with gold and FOREX reserves for extraordinary food purchases from the USA and Canada. There are no other effective measures for solving the problem.

The situation is also very complicated in Russia's cattle-breeding sector. Even before the quotas for imported agricultural produce were introduced, some analysts foretold a critical deficit in meat in the country. The agriculture minister ignored the warnings. When quotas were finally introduced, European and American agricultural producers gave up on Russia and actively started development of new markets. Now we see that the forecasts prove to be true.
Director of the National Meat Association Sergey Yushin and Chairman of the Federation Council Committee on Agrarian and Food Policy Ivan Starikov have raised an alarm on the problem. They held a press conference to declare that Russia was threatened with a critical meat deficit. They said it was the Agriculture Ministry and the quotas introduced on imported agricultural produce that were responsible for the present-day critical situation. The mechanism for distributing quotas for imported beef, pork and poultry is imperfect. As a result, leading importers don't know how to bring food to Russia. Some of them turned out to be very smart and imported a good stock of agricultural produce before the quotas were introduced. The Agriculture Ministry explains that this is the reason why the meat deficit is not so obvious on the domestic market so far. What is to happen when the reserve is over? What will be the rise of prices for meat and sausage?

What is more, the farsightedness of meat importers has a negative effect upon the showings of the RF Agriculture Ministry: import of meat in Russia increased by 60% in March. At that, domestic meat producers have achieved some progress. The National Meat Association reports that domestic producers have increased meat production: poultry production went up by 20% and pork production by 6%.
Sergey Yushin and Ivan Starikov said it was planned to import 315,000 tons of beef, 337,500 tons of pork and 774,000 tons of poultry from the USA until the end of the year. As Russia's old commercial partner, the USA has the lion's share of quotas for chicken legs. However, the US poultry industry is on the decline because of the reduction of export of American chicken legs to Russia, and now it has to seek new markets.

Some sources report that US chicken legs rejected by Russia will be sent to post-war Iraq. That is why we can find ourselves in a rather paradoxical situation some day: when Russia is short of poultry, the USA won't be able to increase its poultry exports immediately. 








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