Since the start of Russia’s war in Ukraine, Russians have been experiencing shortage of some goods, and especially sugar. As the ruble value falls, some organizations would prefer indexing their price on the dollar.
Sugar availability in Russian stores has become rare and its price has dramatically increased in a few weeks.
Stores in the Sakhalin Region in the Far East for instance limited the sale of sugar, cereals, flour, vegetable oil this week because of a spike in demand for these essential products. The government of Tuva in southern Siberia also complained about a shortage of sugar and vegetable cooking oil.
But if Russian authorities acknowledge a shortage of sugar on shelves and a surge of demand by consumers, they ensure it has enough reserve and blames some “unscrupulous organizations” to take advantage of the demand to speculate on its price.
Similar to what happened during the COVID-19 pandemic, when the population fears a shortage of an essential product, consumers tend to panic buy the product, accentuating the shortage and fears of a shortage. Portugal, Spain or Germany also currently experience a shortage of cooking oil.
Demand surge also leads to price increases.
Price of sugar officially increased by 20% since the beginning of the year
Between March 5 and March 11, the price of sugar in Russia increased by 12.8%, according to Rosstat. It is the highest consumer price increase of the week among the 106 goods and services monitored by the official Russian statistics office. The price of sugar grew by 20.4% since the beginning of the year, although the price increase can be closer to 50% in some retail stores.
Overall, inflation grew by 2.09% in a week, and 5.62% since the beginning of the year. The inflation in 2022 really took off since the start of the war in Ukraine. The monthly inflation of the consumer price index in Russia was 1.2% in February and 1% in January.
Authorities asked large retailers to limit their margin on sugar to 5%.
Deputy Minister of Industry and Trade Viktor Yevtukhov said on March 17 on Russian TV that the country has enough stockpile, and that sugar production is higher than domestic demand. Moreover, Vladimir Putin on March 8 ordered an export ban on white sugar until August 31, except for a few members of the Eurasian Economic Union close to Russia, which Yevtukhov says would further increase domestic supply. With the war in Ukraine, countries tend to limit the export of some basic items to ensure domestic food security.
Table sugar in Russia is produced from sugar beet. The Russian Federation is actually the largest producer of sugar beet in the world, with 19% of the global production in 2019.
Sugar beet production in Russia seriously declined in 2020
However, if its production significantly grew since 2014, it fell by 38% in 2020 (20.4 million tonnes) compared to 2019, reaching a low not seen since 2014. According to preliminary data from Rosstat in February, sugar beet production in 2021 was 38.7Mt, 14% higher than 2020 but still 29% lower than 2019’s production, and smaller than the production in 2015.
If it’s unsure how much stockpile Russia really has, the country has however become a net exporter of refined sugar since 2017, with a net export of 857,000 tonnes in 2020 according to F.A.O. statistics.
International economic sanctions after Russia’s invasion of Crimea in 2014 pushed the country to become more self-sufficient. But the recent economic sanctions because of the war in Ukraine is already affecting its local economy.
As the value of the ruble dropped, some sugar producers reportedly now set their prices in U.S. dollars, increasing the local cost of sugar as the value of the ruble decreased.
Authorities blame speculation
But Russian authorities, like Denis Pasler, governor of the Orenburg Region on the border of Kazakhstan, say the shortage of sugar is artificial and created for speculative purposes.
The Federal Antimonopoly Services blames supply chain actors to exploit the rise of demand by increasing prices and warned against creating an artificial shortage of sugar. “The lack of sugar on store shelves in a number of regions is due to a rush in demand, which is fueled by unscrupulous organizations,” the FAS stated. Sugar would be retained by businesses to benefit from future higher prices.
On Tuesday, Deputy Prime Minister Andrey Belousov ordered to find which node of the supply chain overpriced table sugar. The FAS said on March 17 it started checking sugar producers, retail chains and intermediaries to prevent delays in the supply of sugar.
Russian consumers also experience a shortage of other essential goods like diapers, which authorities justify by logistical issues. If the production is localized, diapers also depend on raw imported material, which Yevtukhov said Russia had enough for three months.
Yevtukhov didn’t give reserve quantity details of sugar on TV. He said the demand for sugar has already started to decrease and that shortage issues would probably stop by the end of March.