As per Alexei Gordeyev, Russia’s Agriculture Minister, main food products retailers as well as producers have consented to fix the prices according to current level. The announcement was made after the meeting of officials of food products market. The Cattlenetwork published this news.

This move made by Russia is showing increasing agricultural prices, which is taking the shape of political issue. The big retailers will cap their mark-up price to 10% on these products.

The retailers will have to limit their profits to 10% on major food items (milk having 2.5% or lesser fat, sour cream, non-fat kefir, bread, sunflower oil, eggs, cheese and sugar). In the month of September 2007, diary products’ prices rose fastest out of all food items. There was 7.2% rise in price of milk, 7.9% increase in fermented milk items, and 13.5% rise for both cheese and butter.

Other factors pushing up the prices for food items in Russia are droughts and floods that are damaging the food harvests, changing dietary habits and increasing demands in the developing countries, and also, the growing appetite of biotech industries for grain. The country is dealing with increasing food prices while putting its money into financial sector to counter the worldwide credit crunch. 

Majority of Russia’s population have low incomes and pensions, and the hike in prices, along with the country’s other factors, could further shrink the 80% and plus approval ratings of President Vladimir Putin.

In addition to that, officials are also of the view that increase in prices in summer 2007 could lead to double-digit inflation rate. This would be not be a good news for the President, that too, before December 2007’s parliamentary elections. This is another factor that could lead to price hikes. The country is also countering the price pressures due to oil exports by adopting administrative methods. But some economists are antagonizing that this step would take back Russia to the Soviet era.

A Senior Research Analyst at RNCOS said, “The food sector all over the world is facing problems from high food prices, and even agriculture-dominated economies such as Russia and India are seeing food inflation. The deflation in prices of food products in Russia is only because of approaching Presidential elections. But slump in food prices will not be able to solve big issues like inflation in food products permanently”.