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The non-money forms of settlements (barter,"give and take", mutual settlements, commodity credit, etc.) have become theimportant characteristics of the today's structural changes in the foodmarkets. The difficulties with sale, lack of cash, and burden of thenon-payment of the taxes have given birth to the most varied, multiple-stepforms of barter, "give and take", mutual settlements, commodity credit, etc.For example, OrlovskayaNiva, the regional food corporation of the Orel region,pays the "meat subsidies" to the agrarian producers in grain; sometimes, theagrarian producers pay the taxes in kind. In many regions, the"luboil‑ butter"type multi-stage pattern of settlements has become usual. In accordance withit, the agrarian producers are supplied the fuel and lubricants and pay forthem in, for example, butter that the suppliers of the fuel and lubricantsthemselves take from the dairies to which the agrarian producers supply themilk.

The distinctive characteristic the agrarianmarkets is the strongly grown volume of the shade turnover. In certain regions,the whole volume of the produce, except the share supplied to the regionalfunds or under the commodity credit, is sold, practically in whole, for cash.This is always fraught with the concealment of the really receivedincomes.

The isolation of the regional food marketscontinues. The growth of the barriers between regions is explained by both theunderdevelopment of the market infrastructure, which often increasessignificantly the transactional costs, and by the high administrative barriers.In many regions with the excessive offer, the regional power bodies are moreand more often using the direct bans on the food export as the instrument toregulate the local market. The still remaining (and in certain eventsstrengthening) variation of the prices by regions (see Fig.2.14) may serve thequantitative indicator of the interregional disintegrationprocesses.

Fig. 2.14

Regional variations of sale prices inagrarian markets (price variation factor)

* January toDecember1998.

The important regional variation of theprices on milk by regions makes it clear that it is, mainly, the produce of thelocal market (there is no regional specialization in the milk market). The mainvolumes of the milk are produced and sold within the regions, the interregionalflows are unimportant, hence, the milk prices do not level between regions withtime. As for the grain market, the alleviation of the price dispersionevidences that this product belongs to the national market: the barriersbetween regions were being gradually overcome. However, since 1997, thestrengthening of the export ban practice and the growth of the barriers betweenregions again resulted in the growth of the price gaps between regions. In thebeef market, the attenuation of the dispersion between regions rather seems theevidence of that the main sale of this produce has shifted in the individualprivate sector whose situation is determinant when forming theprices.

Effect of financial crisis on foodmarket

The consumer market was the first to reacton the crisis. the sharp growth of the retail prices was conditioned by thedevaluation of the Ruble, high share of the imported food in the retailturnover, and the rush demand incited by the crisis.

Fig. 2.15

Dynamic of retail prices on certain foods
(before and after crisis), Rbl./kg

Source: RF Ministry of agriculture andfood

To November, after the cutback of the rushdemand, the prices whose growth had been conditioned by the inflationexpectations of the population stocking up the long storage foods began goingdown. In the middle of December, the food prices leaped up again because of thecontinuing growth of the USDollar and growing demand of both the seasonalcharacter and brought on by the depletion of the food stored after the rushpurchase.

The August crisis affected the prices ofall the levels of the food vertical, though to different extents and atdifferent rates. Here the reaction of the meat segment of the food market isinteresting because it is strongly dependent on the feedstock import. Forexample, in the beef market, the reaction of the initial demand prices (retailprices on food) was high in the short term, while the derivative demand prices(purchase prices) grew insignificantly, and their growth went on with a certainlag: it became sensible only to September (see Fig.2.16). At the same time, inthe pork market, not only the retail but also the purchase prices reacted onthe change of the situation in the short term.

Fig. 2.16

Dynamic of purchase and retail prices onbeef and pork, Rbl./kg

Source: RF Ministry of agriculture andfood

The summer crisis abruptly changed theimported to domestic produce prices ratio: the latter got the sensibleadvantage. The consumer demand shifted towards the similar produce of thedomestic production.

Moscow, being the subject of Federationwith the greatest financial potential and concentration of various means,strongly expanded under the crisis the purchase of the food inside the country,even from the regions not characteristic for such purchases in the last years.The Moscow purveyors contracting the food purchases at the conditions ofprepayment and often in cash found themselves beyond the competition with thelocal purveyors. For the one hand, the expansion of the Moscow consumer in thedomestic market indicates the growth of demand for the national agrarian andfood sector. However, for the other hand, the massive outflow of the foods fromthe regions has become the factor having, in the crisis condition, motivatednumerous regional power bodies to impose the bans on the export of the localfood in order to keep the integrity of the local food provision systems.However, the practice has conclusively proven the impossibility of theefficient implementation of such bans in the today's conditions in the country,and one region after another are today lifting such bans.

External trade in food in 1998

In the first half of 1998, just as duringthe previous years, the various limiting methods of regulation of the externaltrade in the agrarian produce and food failed to bring up any important changesin the dynamic and structure of the Russian trade in the agrarian produce andfood. Hence, in January through June 1998, the trend of 1997, expressed in thegrowth of the import and cutback of the Russian export remained.

The financial and economic crisis has alsoled to the alteration of the geographical structure of the trade flows. Whilethe preceding years had observed the constant growth of the food import fromabroad, in the third quarter of 1998, under the effect of the crisis, theimport supplies lessened from both outside the FSU and from the CIS countries.The import transactions with the partners from outside the FSU reduced, firstof all, due to the growth of the prices on the imported products in thenational currency. The food import from the CIS reduced less (by 23% in thethird quarter-year compared with the second quarter-year) than from outside theFSU (by 38%). As a result, the share of the countries outside the FSU in theaggregate food trade turnover reduced from 86.6% as of the beginning of 1998 to82.5% as of July to September 1998, while the share of the FSU countries grewfrom 13.4% to 17.5%.

In the first half of 1998, the cost of thefood import grew, in comparison with the relevant period of 1997, by 17%, whilethe export reduced by 9%. The negative trade balance in the agrarian produceand food sector had always been characteristic for Russia; in January toJune 1998, this index grew even more.

In the second half of 1998, the externaltrade relations of Russia evolved under the effect of the effect of thefinancial and economic crisis. Already in the third quarter of 1998, the sharpreduction of the import of numerous goods was observed. Compared with the thirdquarter of 1997, the import of the food in the cost expression reduced by 36%(see Table2.18). The especially critical drop of the import was observed inAugust and September, just after the financial and banking crisis (seeTable2.17). Lots of Russian companies lost the possibility to receive the bankloans on purchase of the agrarian produce and food; meanwhile, they lackedtheir own assets for the import on the basis of prepayment. The uncertainsituation with the currency exchange rate suspended the food already importedat the bondage stores. Besides, the substantial price gap formed between thedomestic and foreign manufacture goods; this gap will stay for a longtime.

Table 2.17

Change of import of certain agrarian produceand foods

January-July1998, % of January-July 1997

January-October 1998, % of January-October1997

Fresh meat



























Source: Russian State Committee onstatistics and RF State Committee for customs.

Under the effect of the financial crisis,the import of all the groups of commodities reduced. Hence, despite the radicalchanges in the dynamic of the external trade flows, in January to September1998, the share of the agrarian and food import did not change compared withthe relevant period of 1997 and made 27%. The share of the agrarian produce andfood in the aggregate volume of the Russian export also remained at the samelevel, 1.6%.

Table 2.18

Results of external trade of Russia inagrarian produce and food in the first to third quarters-year 1998 (withoutunorganized trade)*




% of 1stquarter-year 1997

% of 2ndquarter-year 1997

% of3rdquarter-year 1997



















Outside FSU,US$million.


















incl. CIS,US$million.

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