Expensive food. Will meat and buckwheat become more expensive in Ukraine and what affects their prices?

Usually, consumers are excited about the sharp increase in the prices of goods and services. Whereas, the price reduction is taken for granted and does not cause any resonance. For example, egg prices. And, according to the State Statistics Service, at the top of the list of goods and services, whose prices fell most noticeably in April 2023 – by 8.7%.

During the month, the fall in the prices of not only chicken eggs but also some other goods and services in Ukraine caused a noticeable slowdown in inflation. According to the State Statistics Service, annual inflation was 17.9% in April 2022, while it reached 21.3% in March. While the price increase was only 0.2% in April, the monthly figure reached 1.5% in March.

“A slowdown in the inflation index was expected, since in this case, first of all, the base of comparison is taken into account compared to the spring of last year, when prices rose sharply against the backdrop of the shocks caused by Russia in the economy. infestation“, – explains the statistical effect of Dmitry Churin, head of the analytical department of the investment company Eavex Capital.

stabilization drives What is the cheapest in Ukraine in 2023?

First, the TOP-5 positions, whose prices have fallen most significantly since the beginning of 2023, according to the State Statistics Service:

• fuels and lubricants: -12.1%;
• chicken eggs: -7%;
• audio and photographic equipment, computers: -3.8%;
• sunflower oil: -2.2%;
• other edible oils: -2.2%.

Svetlana Cheremisinin, Principal Researcher of the Pricing and Agricultural Markets Department at the National Research Center “Institute of Agricultural Economics”, states: Prices of major cereals continue to fall in 2023.

“Compared to January, the price of rice fell by 5.4% to UAH 56.73 per kg, while the price of buckwheat fell by 13.2%, with an average cost of UAH 59.79 per kg. Barley and groats price were 2.0% and groats, respectively. fell by 2.8%, ” explains the interlocutor. Focus.

Meanwhile According to the State Statistics Service, the biggest driver of inflation was vegetables, whose price increased by 42.6% in January-April 2023. However, price increases declined to 0.3% in April. And soon we can expect seasonal stability and lower prices for them.

In the conditional rating of food products, which is the driving force of inflation, meat and meat products, whose prices have increased by 5.4 percent since the beginning of the year, took the second place. Interestingly, in April alone, the price of this group of goods increased by 3.3%.

“The rise in prices led to increased demand for poultry and pork on the eve and during the Easter holidays. And the largest increase in the price of pork (2.5-5.4%) is due to the fact that dishes from it are traditional. Easter table,” explains Natalya, ” Institute for Agricultural Economics” explains Kopytets, Principal Investigator of the National Research Center, Pricing and Agricultural Market Department.

Svetlana Cheremisinin adds that since the beginning of 2023, the prices of bakery products have increased as follows:

• Wheat bread from premium flour: +1.8 to 34.81 UAH per kg
• wheat bread made from top quality flour: +1.7% to 41.81 UAH per kg;
• long loaf: +2.2% to 22.30 UAH for 500gr;
• rye bread: +1.4% to 35.56 UAH/kg.

Interlocutor Focus he points out that in April alone, the price of bread increased by 0.5% (20-30 kopecks per kg).

Time to refine your guesses. What will be the prices in Ukraine by the end of the year?

Experts expect further slowdown in inflation in Ukraine in the coming months and are revising their forecasts for the better. In particular, the Central Bank raised its inflation forecast for 2023 from 18.7% to 14.8%.

“We generally agree with this reasoning because the actual inflation rate fell to 0.2% in April compared to March. Unless there is a sharp increase in energy prices in world markets, consumer prices in many categories may remain relatively stable until the end of the year.“, – comments by Dmitry Churin.

Vitaliy Vavryshchuk, Head of Macroeconomic Research at ICU Group, also shares the NBU’s optimism and expects a significant slowdown in price growth this year.

Vavryshchuk names the following important factors that will help reduce inflation:

• weak domestic consumer demand. Recession in revenue and significant reduction in the number of consumers due to mass migration may encourage manufacturers to operate with lower margins to maintain their customer base;
• lack of intention of the authorities to significantly revise the service tariffs. The long-overdue increase in tariffs is unlikely to happen this year, and the state budget and state monopolies will bear the brunt of the losses to preserve the purchasing power of the population;
• stable exchange rate. The profitability of many import transactions has increased significantly over the past year due to the presence of dual rates in the cash and non-cash markets. So the importers have a significant margin to reduce the margins;
• Fall in world prices for agricultural products. It has been going on since last year and only now the trend is slowly reversing. At the same time, the local supply of vegetables and fruits should increase due to the liberation of large areas in southern Ukraine.

Sharp and unexpected price increases for individual products, such as buckwheat, chicken eggs and onions, are unlikely until the end of 2023.

According to the predictive forecasts of scientists from the Institute of Agricultural Economics, in the next few months grain prices will remain stable, but no further price reductions are expected or will be negligible within 1-2%. This is especially true for buckwheat, which should not experience shortages in 2023.

“Unexpected price increases are not expected for the main meat types, beef, pork and poultry, in 2023. There are no prerequisites for this so far. However, it is possible to destroy it with constant missile attacks in war conditions. or for poultry farming. Destroy production facilities, which could lead to a reduction in the supply of basic meat types and increase meat prices.”

Gas station factor. Does VAT refund on fuel cause an increase in the prices of goods and services?

In Ukraine, on July 1, 2023, the 20% value added tax (VAT) applied to fuel is refunded. Recall that it was temporarily reduced to 7% in March 2022 due to increasing shortages of petroleum products and rapid price increases. But over time, fuel prices stabilized and fell by 12.1% in January-April 2023, according to the State Statistics Service. Meanwhile, the issue of increasing revenues for the State budget is acute, since it is taxes and other own revenues, not international aid that Ukraine can direct to the needs of the Armed Forces of Ukraine.

Refunds for VAT on fuel can lead to an increase in the price of various types of fuel by UAH 5-7 per liter and a new wave of inflation momentum. After all, the fuel component affects the prices of many goods and services.. In addition, Dmitry Churin states that road logistics has now become the main logistics for Ukraine due to the lack of normal access to sea routes, and therefore the issue of fuel cost is very important in determining final consumer prices.

Specifically, as Svetlana Cheremis points out, The predicted increase in electricity prices on the background of a long energy crisis and the imminent return of VAT on fuel will increase their negative impact on the price dynamics of bread and bread products, and the average bread price will continue to increase gradually by 0.5. -1% per month.

The negative impact of the fuel factor can be mitigated to some extent by the trends in the oil market.

“The maximum price of Brent oil in the last 10 years was around $115 a barrel at the beginning of last summer. Since then, there has been a downward trend in prices. The current price is around $75, and according to the base. According to the scenario, oil prices will be around $60-90 a barrel in the next 12 months. It is expected to fluctuate over a wide range.”

Friend Focus guarantees that relatively acceptable fuel prices can be relied on in Ukraine if oil does not go beyond the specified range.

“A repetition of last year’s fuel crisis, which led to a 69% increase in fuel prices in 2022, is unlikely due to the fall in world oil prices and the restructuring of fuel supply logistics. [в Украину]”, – adds Vitaliy Vavryshchuk.