Russian agricultural producers have started talks with the country’s largest food retail chains over raising the prices of some goods by up to 20 percent, Vedomosti business daily reported on Monday.
Bread suppliers are seeking a price increase of 10 percent on average, while bakery producers want price hikes of around 15-18 percent. Food suppliers claim their costs have risen due to increasing electricity and utility charges from July 1, and soaring grain prices driven by expectation of a poor harvest in the wake of the drought currently affecting some areas of Russia.
Russian electricity charges have risen by 6 percent on average since July 1, while gas prices have risen 15 percent. Grain and flour prices shot up by 15-20 percent in July.
“A ton of high-grade wheat flour cost 11,000-11,500 rubles ($343.75-$359.38) wholesale in June whereas now bread producers are already purchasing flour at 13,000-14,000 rubles ($406.25-$437.50),” said Vladimir Petrichenko, head of ProZerno analytical company.
“If we continue to sell bakery products at the old prices, our enterprise will fall short of funds to pay both wages and taxes and purchase raw materials, which will cause the enterprise to grind to a halt,” a bread producer from the central Bryansk Region wrote in a letter cited by Vedomosti.
Russia’s Agriculture Ministry estimates the drought has already destroyed 6 percent of the country’s sown area. The worst affected are the Southern Federal District, the Urals, Siberia and the Volga area, according to Komsomolskaya Pravda daily.
Experts say the drought will cost Russia’s agribusiness about 33 billion rubles ($1 billion).
Russia may lose a total of 14 million tons this year due to the drought, Agriculture Minister Nikolai Fyodorov has said.
High grain and fodder prices will push up the cost of meat, National Meat Association head Sergei Yushin said, adding this would drive up pork prices by December-January, as pig husbandry costs will have risen by 30 percent by then compared to this spring.