World meat industry news

Producers are asking retail chains to recognize the change in the ruble exchange rate as the basis for revising prices. They also insist on reducing the time for reviewing price tags to two weeks. As stated in a letter from Rusprodsoyuz to the Interindustry Expert Council (MES, which unites manufacturers and retailers), the cost of wheat has already increased by 16%, vegetable oil - by 8%. At the same time, according to the Ministry of Agriculture, producer prices are now even lower than they were a year earlier. The Association of Retail Companies believes that the reduction in the time for agreeing on prices and their direct linkage to the exchange rate can lead to an increase in the cost of goods. This issue will be discussed on August 25 at a meeting at the MES, one of its participants told Izvestia.

Manufacturers appealed to the Interindustry Expert Council for the Development of the Consumer Market, pointing out that the sharp depreciation of the ruble worsened the economy of enterprises. In less than a year, the dollar grew by 44%, the euro by 78%, and the yuan by 60%, plus the refinancing rate increased from 8.5 to 12% (which means that loans have become more expensive). This is stated in a letter from the Rusprodsoyuz association, which Izvestia has read.

Domestic prices for raw materials for the food industry have already reacted: in two months, the cost of food wheat rose by 16% with stable exchange prices, and vegetable oil - by 8% since the beginning of the year, with the global value of this product falling by a third.

“The growth in domestic raw materials is due to the exchange rate difference, even if there is an export duty on wheat and oil, not to mention imported ingredients,” the letter says.

Manufacturers also complained about the constant increase in freight rates - demand for them has grown by 61%, and rates for the most popular destinations have jumped on average by 38% in a year and by 10% in the last three months. Against the background of these factors, suppliers incur losses from the sale of goods below cost, as well as paying fines for late delivery of products through no fault of their own.

Therefore, the enterprises proposed, within the framework of self-regulation, to agree on new working conditions before the beginning of next year. That is, to recognize that the volatility of currencies is a sufficient reason for changing prices for both importers and domestic manufacturers. Plus, refuse to apply penalties if the parties do not agree on new prices within 14 days. Thus, suppliers will be ready to stop sending products if the distribution network does not agree on a fresh price list two weeks in advance. Similar measures have already been used in 2014 and 2020 — they have proven their effectiveness.

A meeting on this issue will be held at the MES on August 25, one of its participants specified.

It is extremely risky to change the conditions for changing prices that have already developed in the commodity distribution chain, including accepting the growth of the exchange rate as an unconditional and comprehensive factor that does not require detailed analysis and discussion, Igor Karavaev, chairman of the presidium of the Association of Retail Trade Companies (AKORT), told Izvestia.

“Rusprodsoyuz’s proposals to shorten the period for agreeing on prices and their direct linkage to the exchange rate may lead to an increase in the cost of goods,” he is sure. — The impact of exchange rate dynamics varies greatly for different groups of suppliers, so the very fact of the ruble weakening can hardly be a reason to change the general rules. Moreover, the networks already take into account the pressure of the exchange rate on the goods of each supplier in negotiations. Possible price changes and the reasons for their revision should be discussed individually.

For example, the volatility of prices for sunflower oil is a natural market process and the current price increase is no exception, the Oil and Fat Union recognized. The cost of means of production and processing of sunflower has increased, as well as the cost of logistics, they said.

“According to our estimates, the rise in prices at the end of the year should not exceed the level of annual inflation,” said Mikhail Maltsev, head of the organization. — At the moment, despite the growth of the dollar, oil prices are at levels that are comfortable for food producers: lower than in the summer of 2021 and in the spring of 2022.

Alexander Korbut, an independent expert on agricultural issues, noted that food wheat prices have indeed been growing in recent months. At the same time, now they are equal to last year's cost of these products - 14.2 thousand rubles per 1 ton.

“The cost of wheat is growing against the backdrop of an increase in export prices, but the reasons for the increase in the cost of production for the food industry are in a completely different area: the price list for logistics, packaging, maintenance and repair of imported equipment is growing, wages at food enterprises are increasing against the backdrop of a shortage of personnel, and so on,” the expert explained.

Changes in the exchange rate when using imported ingredients, as well as the dynamics of prices for fuels and lubricants (fuel and lubricants), electricity, logistics can affect the cost of production, the Ministry of Agriculture told Izvestia.

To level these factors, the government is systematically working to regulate markets and support manufacturers.

— This year, the level of food inflation in Russia is insignificant: according to Rosstat, in July, overall inflation was 4.3% yoy, while food inflation was only 2.23%. At the end of 2023, the Ministry of Agriculture does not expect a significant increase in food prices, the ministry noted. - Producer prices for food wheat are now about 4-7% lower than a year earlier, and for wheat flour - by 14.9%.

The ministry also added that today's gradual increase in grain prices will not have a significant impact on the cost of bread, bakery products and other processed products. And the selling price of sunflower oil is now also significantly lower than last year, which ensures a stable situation in the market of oil and fat products, the ministry noted.

Moreover, the volumes of output make it possible to cover domestic needs and develop exports, which serves as a stabilizing factor for the food market, the Ministry of Agriculture said.