FOR THE ATTENTION OF MASS MEDIA: ON FLUCTUAITON OF FOOD PRODUCTS PRICES, CYCLICALITY AND MARKET ECONOMY REGULARITIES

Following an interview of Deputy Head of FAS, Andrey Tsyganov to the “RIA Novosti” Information Agency, other mass media began to publish materials on “growth of prices for food products”. FAS published the original text of the interview and emphasized that it focuses on competitive economy and the specifics of its performance. We would ask to refer to this text for quoting.

—  Since the beginning of the year a lot of materials have appeared in mass media on growing prices for different types of products: eggs, poultry, bread, milk. How does FAS evaluate the situation with food product prices in Russia, is there any need for government intervention in the pricing mechanism? In this case, which products are in the “risk group”?

Andrey Tsyganov: We are watching these prices. We have been watching them already since 1998 when there was a strong upsurge of price. In 2008 there was a new wave of problems related to the economic situation in Russia and the world, and when new sanctions were adopted against Russia, the attention to the problem intensified dramatically. In a rather short period of time the Federal Antimonopoly Service received more than 3000 statements of growing prices. We considered each of them, gave instructions to our regional Offices or FAS itself considered the cases. Now the number of statements regarding price growth is next order lower - 50-80 per month. Already before the New Year, all regional Offices of the Federal Antimonopoly Service were given special instructions to watch carefully food products markets as we were expecting the traditional New Year price increase for some types of food products. This work continues.

Naturally, none of the signals is left without attention. Looking at the statistics, however, in 2018 there were only three cases concerning prices on the food products markets. In these cases only, the Federal Antimonopoly Service collected sufficient evidence to ascertain the facts of violating the antimonopoly law. In most other cases it was simply natural conduct of market participants that do not have the market dominance and do not participate in cartels.

Three food products that show the highest price growth are white cabbage, millet and bulb onion. According to the data from the Russian State Statistics Agency, the highest price growth – dozens of percentages – was observed in the past year. Have you noticed it?

— No.

Andrey Tsyganov: I also did not notice. As for milk, eggs, chicken meat and sugar, traditionally mentioned by the press, in fact this is an analysis of a current situation on these markets But we need to see how the economy is developing  during a rather long period, and which factors underline the price changes.

In the middle of this decade, when the government programme for agriculture development began to be implemented in the full effect, poultry farming was one of the priority sectors for investments. Poultry-breeders received a lot of public funds and invested plenty of their own money. The production was expanded significantly, production capacities increased. As a result, Russia has more than 100% provision of poultry and eggs. In the normally operating economy, price reduction is a natural consequence of this step. Therefore, consumers were very happy in 2017 and 2018 that chicken and egg prices were decreasing. Pork prices, by the way, also fluctuated in the direction attractive for consumers. Evidently, this situation cannot last very long. It is obvious that these companies must return debts, loans that they took to develop production. Nobody is going to work at a loss. Therefore, price adjustment, when prices first go down and then bounce up is a normal phenomenon for market economy. If, however, the price does not change, then the Federal Antimonopoly Service would need to look at the situation carefully to see whether there are signs of price-fixing collusion or a monopolist who is able to unilaterally determine the goods prices. When the price keeps going up and down depending on the market conditions, this is exactly a competitive economy.

— So reports on price increases are just an unnecessary panic?

Andrey Tsyganov: It is absolutely clear that it is not good for consumers when prices go up. Consumers, however, also should understand that if prices are low all the time, there will be no development. Producers should gain adequate profit to maintain production and, what is the most important, develop it.

It should be noted that unlike food products, which we are discussing now, prices for resources required to produce them (compound feed, fuel-and-lubrication materials, plant protection agents, seeds, etc.) have a constant upward trajectory.