beyondbrics

Moscow’s decision to extend Russia’s grain ban for another year may have caught world commodity markets by surprise, but the catalyst seems pretty clear: buckwheat prices have risen 60 per cent in the past 2 weeks.

With food prices in some Russian regions rising 30 per cent, authorities are now finding themselves in a two-fronted battle against food inflation, and against fear.

For Russian consumers the most startling development has been the soaring price of buckwheat, a Russian staple equivalent to rice in China. But other staples have also fallen victim to inflation including eggs, which spiked 8.3 per cent this week according to the state statistics service, and sugar and flour which rose 2.1 per cent and 1.6 per cent this week respectively.

As Putin was making his grain ban announcement on Thursday and extolling the need for Russian farmers to be “focusing on the needs of the domestic market”, President Dmitry Medvedev was also rushing to reassure consumers, promising in the wildfire-hit region of Saratov that Russia would see no meat, milk or sugar shortages.

Wary of the political fall-out any sharp food price rises might cause, Medvedev blamed speculators for the price fluctuations. “Those who are engaging in speculation must be punished,” he said, handing over responsibility for the job to the general prosecutor, interior ministry and the tariff and anti-monopoly services.

According to Andrei Sizov, managing director at Sovecon, the Russian agricultural consultancy, what the president and prime minister are aiming to do is clear.

“The authorities are trying to show that they are watching [food] prices and trying to find the people responsible for the bubble,” he told beyondbrics.

Yet who these speculators are is another story. As Sizov says, most are likely ordinary farmers who are simply doing what is natural and holding their crop as they wait for the price to rise, he said.

While Putin’s extension of the grain ban won’t have any immediate effects on the price of buckwheat, recent polls from state-funded pollster VTsIOM suggest consumers are starting to be reassured regardless: Medvedev’s approval ratings are now back at 69 per cent after falling to 66 per cent during the fires, while Putin’s have rebounded from 70 per cent to 73 per cent.

For the Russian government, it seems, a bit of scrambling is a good thing.

Related reading:

Fears grow over global food supply – FT

Hard to swallow – Short View

Global food prices – In depth

What’s driving wheat prices? – FT graphic