Spring surge: bread prices to grow by 10% in March because of more expensive feedstock

Higher price is a necessary measure

A scan of the letter about upcoming appreciation of bread signed by Director General of the Kazan Bread Bakery No. 3 Dzhavidin Kafarov has leaked to the Internet. He says in the document that prices for all products of the bakery (except two types of social bread – Rural Bread and Wheat Bread) will rise by 10% from 18 March. It seems that the letter was to be sent out to food shops and chains where the bakery's products are sold.

''We hereby inform you that prices for products (except two types of social bread – Rural Bread and Wheat Bread) will go up by 10% from 18.03.2019 according to specification,'' reads the document.

In the letter, Kafarov explains these measures by compensation of the price rise in some types of feedstock: for instance, flour has become 35% more expensive since last year, yeast – by 5%, poppy seeds – by 38%, butter has gone up in price by 18%. 20% growth of price for fuel and lubricant materials and so on was also included in the price of products. In conclusion, the director general of the third bread bakery warns: ''Shipping will stop in case prices for products in your firm's shops can't be raised.''

In the letter, Kafarov explains these measures by compensation of price rise in some types of feedstock: for instance, flour has become 35% more expensive since last year, yeast – by 5%, poppy seeds – by 38%, butter has gone up in price by 18%. Photo: tatarnews.ru

Kafarov didn't want to comment Realnoe Vremya's correspondent's question about the authenticity of the letter and the intention to raise prices for bread and sent it to Ak Bars Holding's press service. However, the press secretary wasn't in office, and we haven't received a comment before publication.

However, in a talk with Realnoe Vremya's correspondent, Dzhavidin Kafarov's colleague Director General of Bakery and Confectionery Bulat Kutdusov confirmed that prices for flour and other components had notably risen since the middle of the last year. So it seems that it won't be possible to avoid higher prices for bread, it will be a forced measure because of more expensive feedstock: ''We're considering at the moment, perhaps we will, perhaps we won't,'' Kutdusov concluded.

The republic has three producers in total: apart from the third bread bakery, it's Bakery and Confectionery and Chelny Bread. The first two are included in Ak Bars Holding, the latter belongs to Tatarstan State Council deputy Rafael Yunusov. According to interlocutors from these companies, despite growing prices for baked goods in general, their social breads won't become more expensive. However, according to data of the Federal Research Centre for Food Systems of the Russian Academy of Sciences, this has already happened:

''Price tags for Darnitsky, Rural, 1 ^st Grade Wheat Bread have already gone up in the Republic of Tatarstan since the middle of October despite the Tatarstan Ministry of Agriculture's promises that the price for socially important foodstuffs wouldn't change till the end of the year. The bread bakeries' petitions for subsidies haven't been granted at the moment,'' head of the Centre for Economic and Analytic Research and IT, press secretary of the V. Gorbatov Federal Research Centre for Food Systems Federal State Research Institution Dmitry Gordeyev told Realnoe Vremya.

According to the centre, higher prices for petrol and diesel fuel, tariffs on energy, the growth of prices for flour affected the decision of some producers to increase the price of end products. Photo: Roman Khasayev

The newspaper's interlocutor also admitted: ''Of course, a considerable rise in prices for energy sources increase a product's prime cost.'' According to the centre, higher prices for petrol and diesel fuel, tariffs on energy, the growth of prices for flour affected the decision of some producers to increase the price of end products. Moreover, the centre also notes the influence of a higher VAT, inflation and the weaker ruble on the higher prices for baked goods and foodstuffs in general.

Specialists of the centre provide data of the Russian State Statistics Service on price dynamics: average prices for wheat flour breads in Russia totalled 47,4 rubles per kilogramme as of 15 October 2018, having increased by 3% since the beginning of the year, rye and wheat flour bread became 3% more expensive – to 46,96 rubles per kilogramme.

Three types of bread won't go up in price

As for social breads, the Tatarstan Ministry of Agriculture also clearly claims: the prices for subsidised Rural Bread, 1 ^st Grade White and Darnitsky aren't planned to grow. According to the ministry, in 2018, bakeries of Tatarstan haven't been provided with subsidies at 38,4m rubles in total. This year 41,1m rubles are considered.

''We don't comment on commercial breads because we can't influence them: enterprises perform depending on the prime cost to pay their costs back. Subsidies [for social breads] have already started to be given to everyone who submitted documents,'' the press service noted.

As for social breads, the Tatarstan Ministry of Agriculture also clearly claims: the prices for subsidised Rural, 1 ^st Grade White and Darnitsky aren't planned to grow. Photo: productcenter.ru

This year Bakery and Confectionery, according to Kutdusov, hasn't so far received support: ''We don't count on the Ministry of Agriculture, we count on ourselves, but it promises to help us.'' Subsidies are given to all bakers of social bread, which meet criteria, the interlocutor goes on: ''It's necessary to submit documents, a statement from the tax service that you don't have budget, tax arrears and so on, to indicate the reason what for you are asking for subsidies. A lot of documentation is needed, it's not given simply to anyone,'' he concluded.