From: MSN NicknameEagle_wng  (Original Message)    Sent: 7/18/2007 9:29 AM
Friday, July 13, 2007

Russia: Bread Prices -- And Worries -- On The Rise

Russia -- bread shop at a bakery in Moscow - 12jul2007
Muscovites buying bread on July 12
(RFE/RL)
July 13, 2007 (RFE/RL) -- Many Russians remember a time when a bukhanka, a loaf of the dense black bread that was an indispensable staple at any kitchen table, cost just 18 kopeks.



Now a similar loaf can cost as much as 15 rubles, and authorities are warning that the price may grow by as much as 50 percent by the end of the year.

The equivalent of $0.90 may not seem a lot to pay for a loaf of bread. But the projected price hikes have sparked anxiety in many Russians, who anticipate a higher all-around cost of living is just around the corner.

"Of course it worries me," confided one middle-aged woman in St. Petersburg. "They say inflation is at 7 percent, but we know it's not true. We see prices going up at the market every day."

With State Duma elections just five months away, and the presidential vote in March 2008, officials are no doubt aware of the electorate's mounting anxiety over the price of Russia's most basic, and most symbolic, food.

MORE: Coverage in Russian from St. Petersburg and Pskov and from Yekaterinburg and Volgograd.

"First it's bread," the woman's friend adds. "Then everything else will follow. Bread will be followed by other products -- flour, pasta, and so on."

Hard Times On The Farm

In fact, the prices of many agricultural products have already started to rise. The price of cabbage has gone up 30 percent this year; carrot prices are now 22 percent higher. Sugar prices have seen increases as well.

Part of the problem, says economist Mikhail Delyagin, is that Russian harvests are yielding less and less each year.

"In Soviet times, Russia harvested between 100 million and 120 million tons of wheat," he says. "In 2002, the maximum amount was 85 million tons. And this year it will be somewhere around 75 million tons."

Poor weather conditions are in part to blame. Many Russian regions have been plagued by droughts and extreme heat.

Drought in 2006 dried up this lake in

Volgograd Oblast (TASS)

In Volgograd Oblast, in southern Russia, more than a third of the spring harvest failed, following baking heat that raised topsoil temperatures to as much as 60 degrees Celsius.

The loss for local farmers was estimated to top $70 million, and there -- as in other drought-struck regions -- food prices have begun to creep steadily upward.

Poorly Managed Sector

But weather is only one factor. Delyagin says the federal government is also to blame, for failing to better protect the agriculture industry, which he says is "being crushed" by fuel and equipment-manufacturing monopolies.

Opening the market to international consumers has also hurt the industry, he says. Russia expects to export as much as 13 million tons of grain this year, and 15 million tons in 2008.

"We're exporting wheat at a time when, strictly speaking, it's really time to start thinking about importing it," Delyagin says.

Some Russian flour and cereal producers have asked the government to halt exports and sell some state grain reserves in order to curb prices at home.

Agriculture Minister Aleksei Gordeyev, however, has said the government is unlikely to sell reserves until prices reach a critical point of approximately $250 a ton -- close to current global wheat prices. (Read RFE/RL Russian Service coverage of Gordeyev's comments.)

Meanwhile, Gordeyev says, a slight rise in bread prices is no reason for panic.

"We're exporting wheat at a time when, strictly speaking, it's really time to start thinking about importing it." -- economist Mikhail Delyagin

MORE: Interview in Russian with Mikhail Delyagin

"Bread in this country costs three to five times less than in the countries of the European Union," he says. "Whether the same can be said for other goods, I don't know. I think the prices of all our other goods and products are comparable."

Food Coupons?

Consumers in many parts of Russia are less sanguine. Bread prices have started to climb throughout northwestern and central Russia, and even members of the country's burgeoning middle class say it's a change they're factoring into their budgets.

"I'm very concerned, because it's going to hit our wallets," says a young man in the Volga River city of Saratov. "We're a young family and every penny counts. So, any price increase will have an effect."

President Vladimir Putin examines

some bread at an agricultural fair in

Rostov-na-Donu last month (TASS)

For the country's elderly, the consequences of the price hike are even more dire. "I receive a small pension," says one Saratov man. "Just 3,100 rubles [$121] a month. I have to pay for utilities, telephone, electricity. I can hardly make ends meet."

In St. Petersburg, at least one official has proposed issuing food coupons to the city's poorest residents to ensure they will be able to buy bread even as prices go up.

The suggestion has sent shivers through a city that still remembers Nazi Germany's 900-day siege of Leningrad, when an estimated 1 million people died of starvation and cold.

At that time, bread was the sole source of sustenance, and it was apportioned out in meager rations -- just 125 grams a day.

With State Duma elections just five months away, and the presidential vote in March 2008, officials are no doubt aware of the electorate's mounting anxiety over the price of Russia's most basic, and most symbolic, food.

Economist Delyagin, for one, is confident that, one way or another, prices will stabilize in the months ahead.

"I don't even think it's worth talking about bread prices going up one-and-a-half times," he says. "I think in the end we'll manage to avoid that. It would be too painful, and ahead of the elections the government will never allow such a thing."

(RFE/RL Russian Service correspondents Danila Galperovich and Olga Vakhonicheva in Moscow, Oksana Zagrebnyova in Volgograd, Olga Bakutkina in Saratov, and Tatyana Voltskaya in St. Petersburg contributed to this report.)

http://www.rferl.org/featuresarticle/2007/07/a7b3dbda-3b38-4456-9e30-0b8f6d809262.html