Food inflation has reached double-digit levels and continues to gain momentum. Prices in retail chains are rising so fast that the official statistics seem understated to many people. Natalya Shagaida, Head of Agrarian Department of the Gaidar Institute, told the “Profile” weekly magazine whether the growth will continue and which food products are likely to become more expensive this year.

As of January 2022, food inflation in Russia exceeded 11%. All consumer prices have soared, however, foods came up the most. Herewith, the growth rate in January is higher than in the Q 2- 3 of the last year.

The Ministry of Economic Development estimates food inflation at 11.13% in annual terms. Vegetables and fruits (16%) were the most expensive according to the organization's review.

Rosstat registered the most notable price increase for cabbage - 15%, cucumbers and tomatoes - 13%, grapes - 12%, garlic - 12%, pears - 9%, bananas - 9% and carrots - 7%. In addition, sugar (2.6%), buckwheat (2%), pasta (2.8%), margarine (2%), flour (1.9%), fish (1.7%), milk (1.6%), canned baby food (1.5%) and beef (1.4%) went up in price in January.

Food inflation has been rising rapidly since last year. Thus, in 2021, the prices for meat and poultry (17.5%), cereals and beans (16%), eggs (16%), pasta (15%), sugar and butter (12%) rose the most.

"It is surprising that according to Rosstat food inflation this year is not as high as in 2014-2015, but then it was not such a popular topic of public and government discussions. Predicting price behavior is a hopeless business. There was already a pandemic in 2020, and the FAO (Food and Agriculture Organization of the United Nations) recorded price declines until mid-year. There was a good grain harvest and prices skyrocketed. There are many reasons and their combinations for rising prices," said Natalia Shagaida.

According to Natalia, now we can make forecasts based on the share of import-dependent costs in the cost structure of products and exports, focusing on external market prices and the exchange rate. There are a lot of such items: seeds for vegetables (a lot of imports), plant protection products (a lot of imports), mineral fertilizers (Russian, but exported). Likewise, more than 60% of feed is included in the cost of poultry, and this is an exported grain and imported additives. Moreover, one has to take into account electricity and fuel tariffs, which depend on government policies.

As for the markups on socially important goods, it is a hopeless case, says Natalia Shagaida. If something will be limited, trade will shift the necessary costs to something else, or the goods with a limited markup will disappear. "In my opinion, the networks' policy looks responsible when they choose certain products fr om each group and keep their low price. However, if it is not a required cost, but the greed of the sellers, it is treated by competition. That’s wh ere we are not very good at it yet," she says.

Interestingly, budget surveys show that despite increases in prices and share of household spending on food, Russians as a whole have not made their diet worse. This is a pandemic paradox, usually the opposite happens. Apparently, savings on other expenditures. i.e. travel, entertainment, transportation, clothing, made it possible to maintain the usual diet.