Based on November figures, the Russian Bureau of Statistics confirms that prices for major foods are growing at a faster pace in the Russian Federation, in particular, potato, cabbage, onion, millet, buckwheat and sugar. Annualized inflation grew by 8% in November with the relevant figure for October being at 7.5%, September - 7%, August – 5.5%. Price growth also affected vegetables and fruits with 4% of growth in November as compared to 1.8% of decline in October. For comparison: foods added five times less percentage-wise in November 2009 that this year.
What lies behind this sudden rise in prices?
Interesting price statistics in the regional breakdown:
1. Sugar has grown in all regions including by over 10% in 8 regions as Masterforex-V experts suggested in a feature: Why and How Much will Sugar Prices Grow?
* by 22% in Jewish Autonomous Oblast.
2. Buckwheat also continues bidding up – it added 5.4% on average in the RF;
* but in Magadan Oblast, taken individually, almost by one and a half times. The maximum growth of prices in the East-Siberian region can be put down to large logistic costs, but record highs in the European part of the RF are beyond explanation.
3. Sunflower-seed oil prices grew by an average of 6.9% around the country with maximum growth of this product (14.9%) registered in Volgograd Oblast while its Southern neighbor, Kradnodar Krai, is a major supplier of this product.
4. In terms of cereals, millet added most of all – it grew on average 15.5% on a MoM basis with maximum growth registered in Ulyanovsk Oblast at 37%.
5. Vegetables also became more expensive: cabbage prices added 9.2%, onion – 7.9%, potato – 5.1%.
However, there are cheaper foods according to official statistics. This list is significantly shorter and includes such foods as:
* lemons that lost an average of 12%;
* garlic that went 2.8% cheaper;
* oranges and poultry – prices fell by about 1.1-1.5%.
Inflationary processes will surely become a burden on people’s purses. Foods are getting more expensive in the context of similar processes worldwide.
What are the prospects for further pricing?
News that arrives from overseas isn’t optimistic:1. Late last week there were summary reports published on global inflation of goods by FAO specialists (UN Food and Agricultural Organization). Based on these data, in November food prices reached a record high since July 2008. The FAO index calculated from figures of 55 types of agricultural products grew from 198.1 points in October to 205.4 in November.
2. Specialists point out to a stable growth of prices over the past five months in a row. Prices increasing at major commodities markets over the past six months result from a number of factors that include, in particular:
* sudden shortages of supplies due to unfavorable weather conditions;
* political steps taken in response by some exporting countries;
* fluctuations in currency markets.
Next year the food basket is expected to grow further unless the situation with production of such crops as maize, wheat and soy beans is taken under control. FAO specialists estimate that rice prices could go up. So far, supply of this product has met demand but the wave of widely increasing prices can overwhelm this little island, too.
What do experts have to say?
Experts of the Masterforex-V Trading Academy see that reasons for more expensive food also include excessive money supply in the market, or a growth in dollar supply, to be more precise. Preoccupied with issue of the national currency, America fills markets with the dollar supply which, on the one hand, depreciates money and, on the other, results in more expensive resources that trade in exchanges – oil, metals and, of course, foods. Actions of American authorities have an inevitable effect on markets of other countries whose governments will be forced to take measures and even out inflationary consequences. According to Leonid Kholod, Executive Secretary of the RF Commission for Food Security, a lot will depend on the state’s action during this difficult period, its ability of redistribute foods, primarily, grains, from high-yielding to low-yielding regions. He believes that food prices grow because of a grave condition in agriculture of Eastern Europe in general and lower crops caused by weather conditions this year, in particular.
Leonid Kholod agreed with the forecast of FAO experts on higher rice prices. Production of its crops in Russia does not meet its demand in full, so the RF imports rice from abroad and is concerned about low crops in South Eastern Asia.
What is the global tendency for pricing of products?
Based on analysis of stock exchange charts of some products traders of the Market Sentiment Analysis Department point to a rising tendency.
For example, the weekly chart of rice futures (ZR) shows market strength - an up-bar with a wide spread supported by higher transaction volumes. The situation is almost similar to last year. One can speak of a seasonal rise in rice prices. A further growth of prices is expected to the target area of $16-16.2.
The market shows some strength in the soy bean futures, too (ZL). A strong uptrend took a break for a correction. This seemingly reflects behavior of a major operator who made an effort to drive down the price and buy a growing asset at a better price. The rising move resumed. The target area for movement is at $55-56.2. After this level is reached and the futures find support above it, further prospects are at $60.
Market Leader in conjunction with experts of the Masterforex-V Trading Academy invite you to take part in a survey for a more objective assessment: What do you think?
* food prices in the RF will grow;
* food prices in Russian will be low sooner or later;
* weather conditions are a major pricing factor.
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