With a new check! How and why food prices soared in Russia

The thing is that more than a third of Russians spend money only on food (according to the December poll “InFOM”, 27% of Russians have enough money only for food, and another 9% cannot even afford adequate nutrition). It is these people who are especially closely watching prices and it is food inflation that is important for them, and food prices usually grow faster than the average inflation rate. At the same time, Rosstat considersthat food products should account for approximately 36% of the average monthly expenses of a Russian (another 10% falls on housing and utilities services, 4% on medicines). Hence the dissatisfaction with the estimates of Rosstat among the poorest Russians, who, of course, could not help but notice that food inflation is breaking records this year and has reached the indicators of 2014-2015, when, due to sanctions, food more expensive at 14–15% per year

How much food actually went up in price

In June, during the “direct line” Putin was asked why bananas from Ecuador are cheaper in Russian stores than carrots and potatoes. Then the president replied that the rise in food prices is, they say, a global trend (this is how Putin usually answers about all Russian problems), and expressed the hope that the new harvest will lead to lower prices for vegetables. Prices have indeed decreased, but the aggregate average annual inflation of the vegetable basket is among the highest.

Let’s try to assess the real scale of the rise in price. To get rid of seasonal price fluctuations, The Insider took the average price of food for 2020 and compared it with the average price for 11 months in 2021. It turned out that, on average, food prices increased by 10.1% – this roughly coincided with the estimate of Rosstat (10.6%), but within this group the spread of inflation is very large.

Among foodstuffs, the highest rise in price was observed for white cabbage (131%), potatoes (56%) and carrots (31%). Buckwheat (26%), onion and eggs (15%) also went up in price. Meat also rose in price faster than other products. So, since the beginning of the year, beef and pork have grown in price by 15%, lamb – by 14%, and chicken – by 27%.

For that a third of Russianswho lives in poverty (that is, all free money is spent on food), this is bad news, since vegetables, buckwheat, chicken are among the cheapest goods, so for the Russian poor, real inflation is not 10%, but somewhere closer to thirty%.

There are also non-food products that are growing in price much faster than general inflation. Building materials rose in price by 40–70%, cigarettes – by more than 18%, cars – by 20%.

There is some truth in Putin’s justification – this year there really was a surge in price increases in the world, which contributed to the rise in prices for goods in Russia.

Why are prices going up around the world?

One of the reasons for the rise in prices is the disruption of production chains amid the pandemic, Ivan Fedyakov, CEO of INFOline, explained to The Insider: “Manufacturers and suppliers experienced great problems with logistics, and as a result, many manufacturers and processors had a desire to create deeper stocks of raw materials and products. which increased demand, and this in turn raised prices. ” As a result, inflation in the USA beat a record 39 years ago and amounted to 6.8%, and in the eurozone it renewed a 13-year high, reaching in November 4.9% in annual terms.

Prices for food are growing more strongly, since the added value for many products is minimal, and the retail price significantly depends on the cost of logistics, explains Fedyakov: “If we take some high-tech smartphones or laptops, they do not change so dynamically in price, because the manufacturer and supplier are ready to take on many problems, since such products have high margins. Agricultural producers do not have the resources for this, and they directly reflect all changes in their selling prices, and a high growth is obtained. “

Logistics in Russia has indeed grown in price, including due to the rise in fuel prices. Most of all, the price of automobile gas has risen – by more than a quarter on average per year. Prices peaked in August-September, when the price increased by one and a half times, but even in November the price remains 25% higher than last year.

A blow to the standard of living

Until 2021, the “poverty line” in Russia was determined by the cost of the minimum grocery basket, rather modest in its content. It assumes that for a basic existence, it is enough for a person to eat 8 kg of potatoes, 9.5 kg of other vegetables, 1.5 kg of fish, 5 kg of meat or poultry, 17 eggs, about two kg of sugar or sweets per month, as well as a certain amount fruits, bread, milk, cereals and oils. In terms of a day, this means one serving of fish, meat or poultry a day, one egg every two days, drinking six glasses of tea a day and several glasses of milk a week. In fact, this is not enough for a normal healthy diet, and people with low income, in order to fill their fill, buy foods high in fast carbohydrates, which ultimately leads to diseases of the cardiovascular system, diabetes, metabolic disorders and other problems.

Parliamentarians and officials have repeatedly proposed to revise the composition of the consumer basket and make it more in line with modern ideas about healthy eating. “In 1992, it was a kind of help from the state to a person so that he would not die of hunger. When he could neither buy food, nor afford, excuse me, a haircut for 100 rubles “, – stated in 2018 Senator Elena Afanasyeva. A new methodology for calculating the consumer basket in 2019 was proposed by the Institute of Socio-Economic Problems of Population of the Russian Academy of Sciences. However, in the end, the government “decoupled” the level of poverty from the prices of basic foods: from this year, the subsistence minimum is calculated as 44.2% of the median income of citizens of the Russian Federation for the last year.

Since the most common foodstuffs rose in price the most in 2021, the price of the minimum set of foodstuffs also increased significantly. Rosstat continues its monthly calculateto compare price growth indices in different regions. However, in the end, the cost of living will increase only by 9.3%, which is significantly less than the rise in prices for basic products in the basket of the poorest Russians (although initially higher pledged government growth of 2.5%).

According to the old formula the living wage in 2022 would have amounted to 14.6 thousand rubles in Russia as a whole – almost 2 thousand more than the proposal of Vladimir Putin. However, with such a recount, it would become clear that the number of the poor has increased, apparently precisely in order to hide this fact, the government began to use a new form of counting.

Olivier Index breaks records

The so-called “Olivier index” was first used in 2009 by the Trud newspaper by analogy with the “Big Mac index”. The cost of a traditional New Year’s salad allows us to estimate the purchasing power of the ruble. In 2021, the Olivier index breaks records: it turned out to be the highest since the beginning of import substitution and reached 16% compared to last year. In 2015, after the start of import substitution, prices for salad products rose by almost 20%.

So, if in 2020 two kilograms of salad would have cost 346 rubles, then in 2021 – already 400, and five years ago a bowl of lettuce cost less than 300 rubles. At the same time, the official commodity inflation in November was 7.6%, but the head of the Central Bank Elvira Nabiullina admitted at the end of the year that the food inflation rate would be double-digit.

The most common products, such as carrots and potatoes, went up the most in a year (by 56% and 31%, respectively). Eggs and mayonnaise are next – their price has grown by more than 15% on average in Russia. Pickled cucumbers, peas and boiled sausage rose in price by almost 10%.

Central bank presupposesthat in the coming year food inflation will be even higher.