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- Bargaining is not appropriate: the authorities will fix prices for socially important goods
Bargaining is not appropriate: the authorities will fix prices for socially important goods
The authorities will fix prices for a number of socially significant goods. We are talking about increasing the share of long-term contracts of manufacturers and retail chains and fixing the value in them, Izvestia learned. It is assumed that the list of goods will be determined by the government, the Ministry of Agriculture said. The agency is currently collecting the position of the FOI and the industry. The FAS and manufacturing companies believe that such a measure will help stabilize food prices. But representatives of retail chains emphasize that market participants who accept a value-fixing agreement may become hostages to their obligations and find themselves at a disadvantage compared to other companies.
Why do they want to fix prices
In Russia, they want to fix prices for a number of socially significant goods when concluding direct long-term contracts for manufacturers and retail chains. The Ministry of Agriculture invited the Ministry of Industry and Trade to send its position on making such changes to the legislation. This follows from the minutes of the ministry's meeting with industry communities and retail chains, which Izvestia has.
A long—term contract is an agreement between a manufacturer and a seller that provides for the delivery of goods in batches over a certain period of time. In this case, the price can be set both at the conclusion of the contract and at the time of product delivery. For the manufacturer, such an agreement is beneficial for the stability of the sale of goods, and for the seller — a guarantee of its availability on sale.
The topic of discussion was the increase in the share of long-term contracts for food products between manufacturers and retail chains. Currently, according to the document, for example, in the supply of chicken eggs it is 70-80%, vegetables — 50-60%. However, as some participants of the meeting noted, these percentages are not permanent and may decrease.
At the same time, as the Ministry of Agriculture reported earlier, it is the volume of these long-term contracts that plays an important role in stabilizing food prices in Russia, as well as maintaining the profitability of the agricultural sector. For example, as Izvestia wrote, a sharp drop in the cost of eggs this year led to farmers starting to destroy laying hens. The situation is different with the cost of beets and carrots. These vegetables have become leaders in price increases since the beginning of the year — by 39 and 57.8%, respectively, according to Rosstat data as of July 21.
— The use of long-term contracts with formula pricing that takes into account the interests of both manufacturers and retail chains will reduce market volatility. Currently, the possibility of consolidating this mechanism at the legislative level is being considered. It is assumed that the list of goods will be determined by the government. At the same time, the Ministry of Agriculture, together with the Ministry of Industry and Trade and the Federal Antimonopoly Service, will monitor the formation of prices in such contracts," the agency's press service explained to Izvestia, noting that manufacturers supported this initiative.
A source in the ministry told Izvestia that it was about fixing prices for socially important goods, including vegetables and eggs.
At the time of publication, the press service of the Ministry of Industry and Trade did not provide a comment on the department's attitude to the initiative.
Pros and cons of price fixing
The FAS told Izvestia that the service supports the expansion of the practice of concluding bilateral long-term contracts between retail chains and food suppliers with the consolidation of certain volumes and prices of supply (price range, price formula), as well as bilateral liability for non-fulfillment of conditions.
"According to the service, this will allow, among other things, to offset the influence of the seasonal factor on the formation of purchase prices for food," the FAS said.
The People's Farmer Association told Izvestia that representatives of the agricultural business had already addressed this issue to the Ministry of Industry and Trade, but had not received an answer.
— Of course, we support price fixing measures in long-term contracts. We have goods, such as vegetables and eggs, that are not exported and are consumed only domestically. There are periods when a lot of these products are produced and the price falls below cost. After that, producers begin to greatly reduce either the area of crops or production volumes. Therefore, after these actions, the quantity of these goods drops sharply, and they become more expensive," Babken Ispiryan, Deputy chairman of the council, explained to Izvestia.
Therefore, according to him, it is important to ensure that there are no price spikes either in the direction of decline or growth. Long-term contracts for 3-5 years should be concluded with manufacturers, and it is also necessary to create a structure that will track prices based on cost and profitability, he believes.
— In competitive markets, pricing is determined by the ratio of supply and demand. In a situation of healthy competition, individual market participants cannot arbitrarily increase the cost, as this leads to a reduction in turnover and profitability," Dmitry Leonov, deputy chairman of the board of the Rusprodsoyuz association, told Izvestia.
According to him, the most effective way to stabilize and lower prices is to stimulate an increase in production volumes and reduce or limit the growth in the cost of resources used in the production process, such as financial resources, energy, logistics, raw materials, etc.
The issue of cost predictability is complex and complex: not all factors affecting pricing can be predicted and determined over a long horizon, said, in turn, the Chairman of the Presidium of the Association of Retail Companies (ACORT) Stanislav Bogdanov.
— Therefore, companies that accept a price-fixing agreement may become hostages of their obligations and find themselves at a disadvantage compared to the rest of the market. In order to eliminate excessively volatile seasonal fluctuations in seasonal agricultural products, primarily borscht vegetables, it is important to develop a mechanism that will meet the interests of the state and be economically feasible for all participants in the commodity distribution chain, which includes not only producers, but also the wholesale link," the business representative explained.
According to him, this approach to long-term pricing can also be applied to apples, greenhouse vegetables, chicken eggs and a number of other categories. The organization is currently discussing possible options for its implementation, he explained to Izvestia.
As Izvestia wrote earlier, the authorities have already proposed a mechanism for fixing prices for basic necessities for 3-4 months. The report by the Center for Macroeconomic Analysis and Short-term Forecasting stated that long-term agreements between manufacturers, retail chains and the government would help curb the rising cost of these goods. According to the analysts' proposal, meat, sugar, vegetables and fruits should be frozen.
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