Ukraine faces food price rise

Related tags Food prices Bread Wheat

Following low wheat crop yields, analysts are warning that Ukraine
isthreatened with increasing food prices, particularly with respect
to breadand bakery produce. The rise in food prices is also
expected to have asignificant knock-on effect for the country1s
already pressurised inflationrate.

Following low wheat crop yields, analysts are warning that Ukraine isthreatened with increasing food prices, particularly with respect to breadand bakery produce. The rise in food prices is also expected to have asignificant knock-on effect for the country1s already pressurised inflationrate.

As a consequence of the rising food prices the Ukraine government had beenforced to increase its forecast for the 2003 inflation rate from its target6 per cent to 7.2 per cent, a Reuters report.

The shortage of wheat stems from an extremely hot summer with low rainfall,which has caused the lowest harvest in over ten years. Bread and bakeryproducts are very much a staple of Ukraine and to date the country has beenlargely self-sufficient in meeting the population1s demands for wheat-basedproducts.

However the Ukraine government has come under criticism for what manyobservers view was an overly optimistic forecast for the country1s inflationrate. "Six percent - that was a completely unrealistic figure,considering the tendency at the moment,"​ Alexiy Bakun, an economist atthe International Centre for Research Perspectives said to Reuters.

"We are seeing very serious pressure on consumer prices and by the end ofthe year we expect to see between seven and eight percent,"​ he added.

Panic buying of bread and wheat back in June was arrested when theauthorities stepped into calm the situation, but since then wheat - and inturn - bread prices have steadily risen. In Kiev bakers have reacted toincreasing flour prices by protesting against the government1s set breadprices. They claim that their livelihood is now be threatened by themeasure.

The State Statistics Committee recently reported that the cost of bread rose13.2 per cent in the first 10 months of the year while that of flour grew by63.7 per cent.

"The authorities have two choices -- to keep a hold on prices until thelast, or make sure an increase in bread prices does not happen in everyregion at the same time,"​ Bakun said.

In response to the criticism it has received the government said it hadallowed marginal increases in the price of bread, which it claimed had hadlittle impact on the national inflation rate. The government added that itexpected the increase in bread prices would be a contributory factor in whatit estimated would be a further 0.5 per cent rise in the rate of inflationover the course of the winter period.

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