What's Causing Russia's Buckwheat Crisis?
Buckwheat prices in Russian shops are soaring without any apparent reason. With Russians becoming ever more insecure about the future, households are stocking up on this nutritious and usually cheap foodstuff, anticipating the worst is yet to come.
When in August, the Kremlin imposed counter-sanctions and banned food imports from a number of countries, many supported the move. Middle-class Russians, who had got used to French cheeses and Spanish jamÃ³n, filled the internet with jokes and mocking comments. One of them pictured a plate of buckwheat with two meatballs, a very common main course of Soviet-era public catering, which is still served in school cafeterias and cheap cafÃ©s. The line under the photo read ‘Russian Instagram, 2015’. But for many the image wasn’t sarcastic or funny at all. People who had been sure they would survive without 'bourgeois' camembert as long as they had enough buckwheat and potatoes, were suddenly not so sure. And they did what they have always done ...
This most traditional of Russian basic foods has recently acquired some of the traits of a delicacy – scarce and expensive. Starting in November, buckwheat simply disappeared from some stores. Demand was so high and so unanticipated that the supermarket chain Lenta limited sales to 5 packs per person. When asked by this journalist what had happened, the retailer’s representative Yana Mogileva explained that Lenta had enough product in stock, and the move had been taken against speculators who had been buying buckwheat in large quantities to sell it on at a higher price later. Mogileva emphasised there wasn’t any shortage of buckwheat.
Regional media reported that the French chain Auchan had also limited sales in Novosibirsk in Siberia to 10 packs per person. Auchan’s representative didn’t respond to a request for comment. The DIXY Group, third-largest retail chain in Russia by the number of stores, stated in an email interview that the variety of buckwheat from different producers had shrunk in some regions, and the company was working on restoring the assortment. The DIXY representative added that demand for grains had spiked last month. In her opinion, the reason was not a shortage of the product but a buckwheat 'frenzy.' According to the ‘Levada Center’, the polling NGO, every third Russian was stocking up on buckwheat in November. Most often, respondents mentioned rising prices as the reason.
Retail buckwheat prices soared 54.4% alone in November (49.8% since the beginning of the year), the state statistics service Rosstat reported. That is the statistical average spread across the whole country. But there are wide disparities depending on region. A pack of buckwheat (about 1 kilo) used to cost 30 roubles (£0.55 when the rouble/pound exchange rate was 54) on average between January and October; now the price range is anywhere between 50 – 100 roubles (£0.57 – £1.14, with the rouble/pound exchange rate having collapsed to 87).
Retailers say that their suppliers started asking more for a tonne of buckwheat in November. Data published in AgroNovosti, the agri-business daily, show that the January – September wholesale prices were quite stable, and ranged from 6,500 – 9,500 roubles per tonne with an average of 7,600 roubles. In October, prices rose slightly to 8,500 roubles per tonne, and then inexplicably jumped to 21,600 in November. Buckwheat started getting more and more costly after the harvesting season when exactly the opposite move had been expected. This suddent price rise, however, can only partly be explained by the problems with the harvest. In the Altai Krai, where almost half of buckwheat is grown, weather conditions were not good; there were rains in September and early snow in October. 200,000 hectares of buckwheat were snow-blanketed, according to the Altai Agricultural Department’s website. According to the Federal Agricultural Ministry, it affected 40% of the regional buckwheat harvest. The news triggered panic buying. The regional government hastily reassured the public there wouldn’t be any shortages and therefore there wasn’t any reason for a price hike. The federal Agricultural Ministry also tried to calm down consumers, and published an official statement under the headline ‘Enough for everyone’. Farmers had produced 744.6 thousand tonne of buckwheat this year, reported the ministry; with annual national consumption at 550 thousand tonne it was more than enough. But prices kept climbing.
Buckwheat panic has happened before. Last time was 3 years ago, after the 2010 abnormal summer heat, which devastated crops. In early 2011, buckwheat prices skyrocketed 260% to 110 roubles per kilo (£2.43 at the January 2011 exchange rate), when the harvest had plummeted by almost three times. But this year the harvest is no worse than average.
Supply and demand
Retailers were the first to be blamed for the price increase. But when regional branches of the Federal Antimonopoly Service inspected the store chains and their suppliers across the country they issued only one warning to a supplier in Tatarstan, one of Russia’s regions. 'It's unclear what's driven prices up,' says Valentina Zelenova, an associate director of a farm enterprise in Altai Krai. 'I don't know why. We don't understand it. Maybe it's middlemen, maybe it's bureaucrats in your Moscow.'
Experts are also unsure what caused the increase in prices. Alexey Pligin, the CEO of the agri-business think-tank AB-centre, says the main reason could be the bad weather in the Altai Krai. 'If the crop surpasses last year’s results, then prices will soon settle. The turmoil over the possible harvest failure in Altai will be finished. But it will take some time before the buckwheat finds its way to grocery shelves as it needs to be processed, packed and delivered. So prices can keep going up, but not significantly, in line with inflation.'
In December, the Federal Agricultural ministry reiterated there was an abundance of buckwheat. The harvest amounted to 680 thousand tonnes, adjusted for possible waste during the processing, which is higher than the five-year average of 666 thousand tonnes, claimed the minister Nikolai Fedorov. He expects the snow-blanketed crops will be harvested in Altai Krai in spring, thus adding another 100 thousand tonnes to the total. The minister even suggested increasing buckwheat exports, although that might not be so easy to achieve when world demand for buckwheat is weak. It is mainly consumed in some former Soviet republics and China. According to the AB-centre, last year Russia exported only 22 thousand tonnes, a record amount. Most of it was sold to Ukraine. But since June this year Moscow hasn't sold buckwheat to its neighbour.
The employee of another farm enterprise in the Altai Krai, Evgenia, who didn’t want to give her last name, said wholesale purchasing prices had started to decline in early December. Rates had fallen to 21,500 roubles (£252 on 4 December) per tonne from 25,000 roubles (£339 on 20 November) two weeks before. 'We don't understand this frenzy. I think it's people themselves who make the shop prices grow.'
All the data indicate Russia has more than enough buckwheat. Yet the prices in supermarkets remain high. Buckwheat has become something of a consumer sentiment index. People on low incomes – a lot of people in Russia – rely on nutritious but cheap foods such as potatoes, pasta, and grains. Buckwheat has always been the cheapest and healthiest choice. A survey conducted by Levada Center last month showed that people who found it hard to manage financially were more likely to give in to panic buying; 34% of them were stocking up on buckwheat, compared to less than 30% in other, higher, income categories.
Another factor is Russia's recent history. In the country, outside of the main cities, where most of the adult population still remembers what it's like to not be able to buy food even with food stamps, just a hint of possible shortages is taken seriously. Especially by the older generations who endured the post-war famine, the limited food supplies of the 70s and 80s, and the empty shelves of the 90s. For many of them, buying grains, salt, soap, and matches for future use has become their modus operandi, against the possibility of economic difficulties. According to the survey, in November, 38% of people over 55 were building up their store cupboards of buckwheat.
Such dramatically increased prices and unexpected spikes in demand indicate that many Russians have become insecure about the future. Since the start of the year the rouble has depreciated by 45%. While state media report on possible economic help from China, and how Russia’s currency plunge is hurting other countries, what is happening to buckwheat is perhaps more indicative of what many ordinary Russian are thinking. They are not alone: many economists foresee a serious crisis in 2015. The former finance minister Alexey Kudrin forecasts GDP will shrink 2 – 4% next year. Official outlooks also anticipate recession. In its latest (and ever changing) forecast, the Ministry of Economic Development expects Russia’s GDP to reduce by 0.8% in 2015.
The words ‘crisis’ and ‘anti-crisis prices’ are heard more and more often in commercials. Even the pro-government newspaper Komsomolskaya Pravda published a collection of recipes from the 90s that helped Russians to survive back then. For example, biscuits that can be made using only cucumber brine, vegetable oil and flour. The blogosphere reacts in various ways: while some are seriously worried, others are drawing cartoons and laughing anxiety away. Despite often a rousing tone that can be heard on state-controlled TV, Russians instinctively fear the return of skyrocketing inflation, and hurry to spend their money on any goods they can afford. During the rouble’s freefall on 15 and 16 December, many people headed for the shopping malls, and queued for laptops and TVs. In 2015, food – buckwheat included – and electronics prices are expected to grow up to 30% according to many estimates.
If buckwheat can be seen as the state of a nation, Russia is in a state.