Cabbage, potatoes Russia's new luxuries

At a bustling market on the north side of Moscow, shoppers are upset: after last summer's devastating fires, staples such as cabbage and potatoes are suddenly pricier than the fancy new imported foods. Booming developing world demand was already pushing up the price of basic food items when Russia was hit by a catastrophic drought that eventually forced the Kremlin to call a halt to all wheat exports last year. But the emergency measure provided only temporary relief, with both shoppers and analysts noting an alarming new trend developing on the shelves of stores stretching from Vladivostok in Russia's Far East to Kaliningrad near Poland. "Since the summer, potatoes have become unaffordable," said 30-year-old Marina, a regular shopper at the Moscow market.
Since the middle of December, the price for a kilo of potatoes has almost doubled from 25 rubles (8cents) to more than 40, leaving many shoppers shaking their heads in dismay. Staring speculatively at a fruit and vegetable counter, pensioner Maria says she now thinks twice before making a purchase. "Everything has gone up (in price): sausage, meat, milk ... not to mention vegetables."
Paradoxically to many Russians, a kilo of bananas is now cheaper in most stores that a sack of potatoes - a fact that has not been lost on the higher ups in the Kremlin. Although there are many factors behind the food inflation, analysts point the primary blame on a record drought that saw harvests fail in 28 Russian regions, slicing half a percent off the country's gross domestic product. "There have been several waves of price hikes" in the wake of the weather anomaly, said Alfa Bank economist Natalia Orlova. "It started with bread and buckwheat, and was followed by milk and now meat." In January alone, the price of an average consumer basket rose by 5.5 per cent to 2769 rubles ($94), according to the Federal State Statistic Service. The situation is being compounded by accelerating demand in Asia and poor harvests in big crop-producing states- one of the many sparks that set off the recent social unrest in North Africa and the Middle East.
And although Russia is not as sensitive to the price shocks as some of poorer Arab nations, its prices still move lockstep with those on the global market, said Moscow's Higher School of Economics analyst Sergei Aleksashenko. "For cereals, meat, sunflower oil, sugar, milk, Russian prices are fixed according to world prices and their dynamics," he said. All the more so because - facing shortages - Russia has been forced to import certain foods. In December alone, imports of potatoes multiplied tenfold and while those of cabbage rose by 150 per cent, official statistics show. With annual inflation expected to come in at almost seven percent this year, the authorities are keen to make sure that food prices do not become an issue at December's parliamentary elections and next years presidential poll. Last week, President Dmitry Medvedev held a stern meeting with his Economic Development Minister Elvira Nabiullina, telling her that the government's success depended on its ability to control inflation. And in late January, the Deputy Economic Development Minister Andrei Klepach said he was mulling the option of introducing price caps on certain basic items.