Following raw materials, essential products become more expensive

In the regions of the Black Earth Region, from the beginning of April, the price of bread and sunflower oil will rise by 10-15%. Processors explain the jump in prices by the increase in the cost of raw materials since the beginning of the year: grain - by 35%, seeds - by 25%, as well as energy resources. Participants in the retail market promise to keep the final cost of products, but cannot guarantee anything. However, according to experts, bakers and butter makers are already working at the limit of profitability. Yesterday in Voronezh, bread prices increased by an average of 20%. In some stores, a loaf of “Darnitsky” costs 14.5 rubles compared to the previous 12. However, the regional licensing chamber officially reported that there is no serious jump in food prices in the region. But a source in the licensing authority admitted that at the end of March - beginning of April, bread prices will increase by 10-15%. The head of the Voronezh retail chain Tsentrtorg, Sergei Kastryulev, gave a similar forecast. General Director of Voronezh Bread Company CJSC Vladimir Golov confirmed that at the end of the month prices for bakery products are expected to increase by 10-15% in the region. He explained the situation by a rise in grain prices by 35% - from 7 thousand rubles per ton at the beginning of the year to today's 9.5 thousand, as well as an increase in tariffs for utilities, in particular for gas, by 20-25%. According to Mr. Golov, bread prices are rising differently in different regions. “For example, in Belgorod, the rate of increase in prices has been reduced due to the fact that the regional authorities are creating reserve grain funds, with the help of which they regulate prices,” explained the top manager. According to the press center of the Belgorod regional government, an increase in bread prices is expected from the beginning of April. For example, the retail price for Darnitsky will rise to 7.5 rubles versus 6-6.5 rubles per loaf. The reasons are the same as in Voronezh - an increase in energy tariffs.

According to Olga Pavlovskaya, deputy general director for trade of the GreenNN corporation (owns the Line hypermarket chain in Central Russia), the company has already begun to receive letters notifying them of an increase in selling prices for bread from Voronezh and Stary Oskol suppliers, in other regions - Kursk, Lipetskaya, Tambovskaya and Orlovskaya - so far everything is calm. “But we have not signed new agreements - we will try to come to an agreement, since we initially position Line as a low-price store. However, we expect similar letters from bakers from other regions of the Black Earth Region, and I think butter makers will not be delayed,” she explained, adding that the increase in the cost of other food products has not yet been significant, with the exception of alcoholic products.

Most of the major participants in the oil and fat market - Bunge, Yug Rusi, WJ Group, Efko, Solnechnye Produkty - have already announced an increase in prices for bottled oil. For Bunge's best-selling product item - Oleina sunflower oil in a liter bottle - the selling price has been increased from 45 to 55 rubles. The prices of Yug Rusi and WJ were raised to above 50 rubles. Efko plans to do the same in April. Processors note that the main reason for the increase in selling prices is the increase in the cost of raw materials, which, according to Kirill Bolmatov, director of corporate affairs at Bunge CIS LLC, has increased by 25% since the beginning of the year. According to his forecast, prices may fall slightly only in September-October, during the harvest, although last year there was no seasonal decline. “In the longer term, prices will continue to rise smoothly,” he added.

Leading analyst of the Institute of Agricultural Market Studies (IKAR) Alina Mirsagatova believes that already now packers are working with almost zero profitability, since the cost of a liter bottle of packaged refined oil is almost equal to the price of a liter of raw oil of 50 rubles. “This season has been unfavorable for processors due to record high prices for sunflower. For example, at the beginning of the 2006 season, a ton of sunflower seeds cost 5-6 thousand rubles, in September 2007 prices rose to 12 thousand, and now they reach 22-23 thousand,” the expert explained. Further suppression of retail prices for butter will lead to the fact that butter producers will begin to operate at a loss.

As for the rise in bread prices, according to IKAR leading analyst Igor Pavensky, its main reasons should be sought in a decrease in grain reserves (in 2008 they were 1.2 million tons lower than last year) and an increase in demand on the domestic market. For example, the livestock industry began to “eat up” much more grain (the share of grain in feed is 70-80%). At the same time, the expert believes that the current trend is short-term in nature and prices should stabilize over the next week, since domestic consumers - livestock farmers and flour millers - have already made the main purchases. Although, according to Mr. Pavensky’s forecasts, by the end of June the price of grain will increase from the current 9 thousand rubles per ton to 11-12 thousand. “Thus, the situation of last year will be repeated, when bakery products rose sharply - by 20-50% at once.” “, – summed up analyst Igor Pavensky.

Olga Alexandrova, Evgeny Timoshinov

Kommersant (Voronezh) No. 51 from 03/28/2008

The bread flew into the butter