Bread battles

First Deputy Prime Minister of Ukraine Mykola Azarov is confident that the old prices of consumer bread varieties “will be removed from the agenda within a week.” He explains this by the absence of objective reasons for the increase in prices of this main consumer product. He believes that the actual reasons behind the bread situation should be sought in the latest escapades of BYuT faction leader Yulia Tymoshenko and her fellow party members. Azarov is certain that they are the ones responsible for what is happening in the regions, where the bread-baking plants controlled by them are located.

The artificially created situation with bread prices is obvious, says Ukraine’s number-one financier. If there were actually any economic problems, they would be instantly reflected by the inflation rate, Azarov underlined. Meanwhile, in the past five months the rate of inflation has remained at the relatively stable level of 1.5 percent a month, which is proof that prices are duly regulated in Ukraine.

However, the Cabinet of Ministers cannot afford to remain on the sidelines of the situation being generated by monopolists on the grain and bread market. On Azarov’s instructions, officials of ministries and agencies, together with regional authorities, must quickly and effectively resolve this problem and prevent a public outcry. “We must get prices back to the market parameters within which the production of bread is maintained, so that it will correspond to our citizens’ living standard,” the first deputy prime minister pointed out, adding that the current bread situation (the cost of grain having increased by up to 20% in Volyn, Ivano-Frankivsk, Kirovohrad, Zhytomyr, and Chernivtsi oblasts) is an attempt to create a problem out of nothing.

Azarov says there is no cause for panic because government silos have enough grain left over from the 2006 and 2005 harvests (2 and 1.1 million tons, respectively). With this year’s yields (6-8 million tons) this will supply all food and fodder needs. “If need be, we will adopt measures to keep this grain in Ukraine.” President Viktor Yushchenko supports the government’s stand and is urging politicians not to capitalize on the grain issue.

But declarations are not enough. The cabinet plans to solve this risky issue in two ways: administratively and by market means. Regional branches of the Antimonopoly Committee of Ukraine and law enforcement agencies have started taking stock of local grain reserves. The first successes were scored in Dnipropetrovsk oblast where, after negotiations with the management of five bakery plants, the situation was brought back on track. The widest price fluctuations are in this particular region, which range from 3 to 20 percent, as opposed to 5 and 7 percent in other oblasts.

The behavior of bread producers attests to the fact that the government has set out on the correct path of combating these unjustified price increases. Learning about the approaching anti-monopoly inspection, most of them voluntarily approved “correct decisions.” In the absence of a logical justification for the bread price increases the prospect of being fined is a perfect remedy. “We held meetings with leading bread producers in Poltava oblast. As a result, bread prices have returned to the previous level,” Oleksii Kostusev, chairman of the Antimonopoly Committee, said.

Grain interventions from state reserves have also been introduced in order to lower bread prices. Whereas a bread producer buys a ton of grain for 2,000 hryvnias on the market, a state transfer is cheaper by 700 hryvnias.

Today, few are discussing the government’s excessive enthusiasm for administrative measures. Prime Minister Viktor Yanukovych is demanding that the bread price situation be corrected within a week. Otherwise, ministers in the agrarian bloc will have to start looking for new jobs even before the elections. This has obviously spurred them to action.

Some governors are still resisting. Yurii Pavlenko, head of the Zhytomyr Regional State Administration, declared that governors have no levers for keeping the pricing situation under control, insisting that this is the prerogative of the central government. Economy minister Anatolii Kinakh is stressing the responsibility of local authorities and has threatened governors with severe punishment if they let bread prices continue to rise in the oblasts under their jurisdiction.