Tubers in chocolate: business has started to fix potato prices
Retailers and producers have started to fix prices for some types of potatoes, Izvestia has learned. It is about agreements on the so-called "price formula", which may become an alternative to the mechanism of tender purchases. According to Rosstat, the vegetable has gone up in price by more than 88% since the beginning of the year. Pyaterochka, Perekrestok, and Chizhik (X5 Group) chains were the first to fix prices (for three months so far). As "Izvestia" was informed in the Potato Union, other retailers, with whom negotiations are currently underway, may follow suit.
Stabilization of potato prices
Retailers and producers have agreed to fix prices for a certain type of potatoes. It is about unwashed root crops in nets weighing 25 kg and with a diameter of 50 to 80 mm. This was told to "Izvestia" by the Executive Director of the Potato Union Alexei Krasilnikov.
- The decision to fix prices was made just the other day. Now it has been confirmed by X5 Group (Pyaterochka, Perekrestok, Chizhik chains) and three large potato producers, who are either working out existing contracts for the purchase of the vegetable, or concluding new ones. In addition, there are similar negotiations with other federal chains and producers, which I would not like to designate ahead of time," he said.
According to him, this is a joint decision to limit both retail chains in their markup on potatoes and producers in selling the vegetable to retailers.
- This should serve to stabilize prices and increase the availability of potatoes on the shelf. According to Rosstat, the average Russian consumes 54 kg of the vegetable per year, 4.5 kg per month. We believe that this monthly volume should not be more expensive than Br400," explained Alexei Krasilnikov.
At the same time, he did not disclose the details of the price fixing arrangements, referring to commercial secrecy. He called it a positive factor that now many retail chains are starting to work directly with producers under agro-contracts, which are concluded for two or three years and allow farmers to plan the volume of harvest.
Another measure to stabilize potato prices, according to Alexei Krasilnikov, should be the zeroing of duties on imported goods. Such a decision has already been made at the level of the Eurasian Economic Commission. It will be valid from January 1 to July 31, 2025. We are talking about the supply of vegetables in the volume of not more than 150 thousand tons. According to the representative of the Potato Union, these are primarily root crops from Egypt and Azerbaijan.
The information that the Association of Retail Trade Companies (ACORT) confirmed to "Izvestia" that they are working with other retail chains to curb prices.
- Large retail chains are working closely with manufacturers, the government, the Ministry of Industry and Trade and other agencies, working on tools to curb the growth of cost and maintain the availability of products. One of such tools is temporary price fixing for popular positions of socially important goods with high rates of cost growth," said Igor Karavaev, Chairman of the ACORT Presidium.
According to him, purchase prices for potatoes this year have increased 2.5 times, retail prices in retail chains - about twice.
- To stabilize prices and reduce their further volatility, federal retailers and suppliers are also discussing additional fixing of cooperation parameters within the framework of long-term contracts. Among other things, we are talking about agreements on the so-called "price formula", which can become a significant alternative to the tender procurement mechanism," explained the business representative.
He believes that such measures make it possible to increase the degree of cost control and avoid subjective distortions in pricing, to make this process as transparent as possible, corresponding to the interests of all parties without the need for state regulation.
"Izvestia" sent a request to X5 Group and other retail chains to comment on the decisions to fix prices.
Why potato prices are rising
- Wholesale potato prices are subject to significant fluctuations this year, therefore the Potato Union has proposed to conclude supply contracts with a fixed price for three months. Such a measure will reduce the volatility of the purchase price, allow producers to forecast sales, and support consumers during the period of the most active demand," the press service of X5 Group told Izvestia.
They noted that supply contracts are available for the company's three retail chains - Pyaterochka, Perekrestok and Chizhik. The company added that from 2022 it voluntarily limits the markup on the best-selling items of socially important goods, including potatoes, to 5%.
- Regardless of the dynamics of wholesale prices, we ensure the most affordable retail price for customers by setting a minimal or even negative markup," the company explained.
The potato price increase in Russia started in mid-October - in fact, simultaneously with the end of its harvest. During one week of the month in a number of regions the price for the vegetable increased by more than 5%. The biggest increase was noted in the Volgograd Region - by 5.9%. Since then, the cost of potatoes, according to the official statistics of Rosstat, every week only increased. According to the service's data as of December 16, this indicator has amounted to 88.86% since the beginning of the year.
Concerns about the rise in potato prices were previously expressed by deputies of the State Duma. As "Izvestia" reported, the deputy chairman of the Committee on Security Anatoly Vyborny asked the Prosecutor General's Office and the Federal Antimonopoly Service to check the validity of pricing for the vegetable in retail chains, where it costs four or five times more than wholesale, while producers claimed only a two-fold markup.
In the response of the Prosecutor General's Office to the deputy, which Izvestia has, the agency instructed the Federal Antimonopoly Service to check the validity of the markups.
The FAS (Izvestia has its response) said that on the government's instructions, the service, together with federal executive bodies, has already analyzed pricing for certain types of socially important food products along the entire commodity chain.
"The analysis showed that the rise in consumer prices for certain food products is due to an increase in wholesale prices of producers associated with objective economic factors, such as an increase in production costs and expenses associated with the production and supply of food products," the response said.
In order to increase the price and physical accessibility of socially important food products, FAS recommended federal retail chains and the Union of Independent Networks of Russia to work on the adoption of voluntary commitments to limit the level of marginal trade markups in case of their absence, and in case of their presence - to expand the list of commodity items for which such commitments have been made.
At present, 12 retail chains have already expanded the list of goods with limited markups, the service specified, noting that at the same time, proposals for price stabilization have been submitted to the government.
"Izvestia" sent a request to the FAS to explain what new measures to contain the cost of goods may be in question.
The Ministry of Agriculture told Izvestia that together with the Ministry of Industry and Trade they are carrying out systematic work to transfer producers and retail chains to direct long-term supply contracts. This allows to ensure predictable volumes of products and low volatility of prices for them in retail, helps to maintain a stable situation in the market of potatoes, vegetables and a number of other products, the ministry explained.
In addition, they noted that the government decree № 662 provides for the conclusion of voluntary agreements between the authorities of the subjects and businesses on fixing the maximum allowable retail prices for products included in the list of certain types of socially important food products of prime necessity.
- Despite the difficult weather conditions of the current year, Russia's potato harvest is not below the five-year average. According to preliminary data, 7.2 million tons have been excavated in the organized sector, which corresponds to the 2022 level. This volume will make it possible to meet the bulk of domestic demand. At the same time, taking into account the seasonal factor, in the first half of next year the Russian market will traditionally receive imported young potatoes from friendly countries, which will complement the assortment in the off-season, - reported in the press service of the Ministry of Agriculture.
Georgy Ostapkovich, Director of the Center for Conjunctural Studies of the Institute of Economic Research of the National Research University Higher School of Economics, considers the measure to fix prices for potatoes effective, but not market. According to him, many countries use it to curb price growth, but it should be short-term, from three to six months, so as not to bankrupt businesses.
The expert believes that the rise in prices for the vegetable is partly fair, as for many years potatoes have been the cheapest and non-inflationary commodity.
Earlier "Izvestia" reported that the largest producers of dairy products as a result of negotiations with retail chains and regulatory authorities began updating the pricing policy for socially important products. Businesses announced price fixing for some products and pre-New Year promotions.
In addition, the Ministry of Agriculture supported the draft law "Fair Russia - For Truth" on state regulation of prices for socially important goods. The parliamentarians proposed to allow regional authorities to limit wholesale and retail markups to 5% and 15% respectively. We are talking only about socially important goods, it is a little more than 20 items, the list includes beef, poultry, butter, bread and so on. At the same time, the negative feedback on the bill was agreed upon by the Ministry of Economic Development, the Ministry of Finance and the Federal Antimonopoly Service.
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