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Russian Panic Buying Fuels Food Price Speculation

Russians have responded to slashed harvest forecasts by hoarding staples, which has contributed to price gouging, Agriculture Minister Yelena Skrynnik said.

Russians have “traditionally” responded to bad harvest news by buying enough food to last for months, Skrynnik said at a government meeting in Saratov today. “This leads to a sharp rise in demand for foodstuffs and as a result creates the conditions for artificial, speculative price increases.”

President Dmitry Medvedev said Russia won’t have food shortages “despite a very difficult year” and there are no grounds for rising food prices. He ordered law enforcement agencies and the state competition watchdog to monitor prices.

Russia’s grain crop will fall to between 60 million and 65 million metric tons this year from 97.1 million tons a year earlier because of the worst drought in at least half a century and record heat, Skrynnik said.

The government banned grain exports from Aug. 15 and won’t consider lifting the restriction until next year’s harvest is in, Prime Minister Vladimir Putin said today. Harvest forecasts for crops from beets to corn have also been slashed.

Consumer prices rose 5.4 percent in the year through Aug. 30, according to the Federal State Statistics Service. In the week, the price of eggs jumped 8.3 percent, while buckwheat groats rose 5.1 percent, sugar 2.1 percent and flour 1.6 percent, the service said.

‘In Our Blood’

Irina Steshkina, 58, a nanny in Moscow, said Russians don’t trust the government when it comes to food. “As soon as we hear rumors of shortages, it’s time to buy,” she said in an interview. “And speculators know this as well as anyone.”

Steshkina said her aunt and uncle, both 76, had stocked up on flour and sugar. “It’s in our blood from the Soviet era,” she said. “We stockpile for the future at the slightest provocation.”

Food prices have increased more than 30 percent in some regions, Economy Minister Elvira Nabiullina said today. “But there’s no need yet to impose price caps,” she said. “The present situation is based in part on speculation and in part on panic buying.”

The harvest isn’t complete, and the ministry expects supply and demand to come back into balance, Nabiullina said.

Buckwheat Crop

An association of agricultural producers and food retailers signed an agreement on Aug. 31 with the Agriculture Ministry on joint price monitoring and efforts to boost farm output.

Maria Nesterova, 50, an unemployed construction worker, said she was particularly worried about the price of buckwheat, which she needs to eat because she’s diabetic. “I can get by without meat, but I have to have buckwheat,” which has doubled in price at her local market, she said.

Russia’s buckwheat crop may more than halve this year to the lowest level in 40 years because of the drought, SovEcon said yesterday.

“We’re panic-mongers,” said Natalya Vinogradova, 64. “I see everyone buying flour, so I bought a kilo this morning. I don’t need it, but I bought it. Now I’ll have to find some place to store it.”

To contact the reporter on this story: Lyubov Pronina in Saratov at lpronina@bloomberg.net; Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net

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