The Russians will not notice the fall in food prices

Food prices will drop by a few percent

August gives us not only a chance to bask in the last rays of the outgoing summer, but also gives us hope for a seasonal decline in food prices, the abundance of which, of course, under conditions of a good harvest, should appear on store shelves. In the last weeks of July, according to Rosstat, the cost of most food products really fell: out of 44 food products, 35 items fell in price. However, experts advise not to count on a global fall in food prices. Most market factors suggest that Russians will have to face the reverse trend as early as September.

Fedor SIDOROV, private investor:

“Our agro-industrial complex has, in some cases, a high dependence on imports. Abroad, we buy 20% of all consumed potatoes, 85% of eggs for growing broilers, seed material (in corn, which is necessary for the poultry and livestock industries, up to 95%). Meanwhile, inflation abroad is growing, which affects the cost of domestic food. If corn rises in price, then prices for meat, eggs and dairy products will rise.

Of course, August is the peak of the high agricultural season, when the stores receive the maximum amount of products from the fields. Price reduction for individual goods or product groups is possible, but it will be minimal (1-3%) and almost imperceptible for the mass consumer. In some cases, cheaper products will be the result of the policy of manufacturers who will try to find another foreign supplier or reduce personnel and logistics costs, as well as the result of retailers’ actions, including through the provision of special promotions. However, prices will not change dramatically. In August, Russians will live in relative price stability, but in autumn the cost of food, both domestic and imported, will begin to rise again. Weak consumer demand remains the only limiting factor for the increase in food prices in Russia. On the one hand, it restrains inflation, on the other hand, it reduces the income of producers and retailers, who, in order to prevent a new round of savings on the part of buyers, will be forced to raise prices very carefully. This will affect the entire line of food products – bakery products, groceries, milk, meat, sausages, cheeses and eggs. The weakest dynamics of price growth will be observed in long-term storage products due to the fact that they are not perishable goods.

Mark GOIKHMAN, chief analyst at TeleTrade:

“Food is the necessities without which it is impossible to exist. Therefore, the demand for them as a whole, according to economists, is low-elastic. This means that when prices rise, the volume of food purchases practically does not decrease. However, now in our country at the same time there is a general decline in incomes of the population. According to the same Rosstat, the real disposable income of the population in the first quarter of 2022 fell by 1.2%, and in the second quarter – by another 0.8% compared to the same periods last year.

But even with a decrease in income, people save on the purchase of food only in the last turn, therefore, in the total mass of family expenses, the cost of food begins to occupy an increasing share. Moreover, even with relatively low food inflation. According to statistical agencies, in the last week of July, Russians’ spending on all categories of consumer goods rose by 5.8% compared to the same week in 2021, while spending on food alone rose by 15.7%.

There are also differences in the types of food. The fastest growing prices for goods that are in the greatest demand and are relatively inexpensive. Therefore, the price of a real set of products bought by the majority of people changes faster than for food items in general, which additionally raises the share of food costs, although it would seem that the overall rise in price is not so noticeable.

At the end of summer and autumn, I can traditionally fall in price, first of all, domestic vegetables and fruits of the new crop, the supply of which will increase significantly. On the other hand, imported consumer goods may give a more noticeable rise in prices due to the decrease in previously accumulated stocks and the recent increase in exchange rates against the ruble.