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MARKETS ▶▶▶


Black Sea countries scramble to tame the feed price rally


Against the background of the Covid-19 pandemic, the countries of the Eurasia Economic Union (EEU) and Ukraine have to deal with rampant food inflation caused by soaring feed prices. New approaches may be needed to deal with the rising costs.


BY VLADISLAV VOROTNIKOV, CORRESPONDENT I


Export restric- tions are likely to overheat the domestic mar- ket.


n December 2020, Russian President Vladimir Putin or- dered the federal authorities for the first time since Soviet days to introduce state price regulation on the domestic food market. “In the Soviet Union, they said the country


had everything. But there wasn’t enough food for everyone,” Putin claimed, speaking during a government meeting, add- ing that these days, the country could encounter a similar threat, not because there is no food, as in Soviet times, but because it’s becoming unaffordable. On December 22, the State Duma, the lower house of the Russian Parliament, approved the second reading of a bill on state regulation of staple food prices initiated by the


government. The government now has the right to establish price ceilings for up to a 90-day period for a list of socially vi- tal goods, including poultry and pork. This decision has been cautiously criticised by the Russian meat industry since, over the previous few months, prices had been rising, and not without reason. The Russian Union of poultry producers Rosptitsesoyuz released a statement claiming that the indus- try’s production costs had increased by 15% to 20% in the previous year. To avoid the industry descending into a ful- ly-fledged crisis due to the upcoming price regulation, the government must consider allocating state aid to poultry companies, Rosptitsesoyuz said. The average price of feed in Russia totalled Rub19,100 per tonne (US$ 259), 13% up compared to the same period in the previous year, the Russian state statistical service Rosstat esti- mated. This is believed to be the strongest one-year growth in the past decade, and yet market participants believe that the government estimations are erroneously low. In October of 2020, Russian poultry producers appealed to the government, asking the authorities to subsidise purchas- es of feedstuffs; however, without success. This appeal was supported by the Russian Union of Pork Producers (RUPP). Pork production costs are expected to climb by 10% to 15% in 2021, pushing up both retail and export prices, said Yuri Kovalev, chairman of RUPP, speaking during a press confer- ence in late December 2020. In this situation, quite a few farms may find themselves operating below the break-even point, Kovalev warned.


The cure might be worse than the disease The price regulation, however, appeared to be only part of the government’s response to the unprecedented price rally. In December 2020, Russia’s Economic Development Ministry proposed that the government should impose a wheat ex- port tax of 25 euros (US$ 30) from February 15 to June 30, the Economic Development Minister Maxim Reshetnikov re- vealed in late December 2020. The export quota will be set at 17.5 million tonnes for the same period. Such quotas are im- posed to stabilise the price situation on the domestic grain


26 ▶ ALL ABOUT FEED | Volume 29, No. 1, 2021


PHOTO: IDK TRADING PLATFORM


PHOTO: RUSSIAN FEDERATION ANALYTICAL CENTER


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