Food prices continue to rise in Ukraine. Meat, vegetables, and sugar are a hryvnia or even several hryvnias higher in March than they were at the beginning of the year. Experts say this price hike is due to the increase in the minimum wage in Ukraine and a poor harvest. Prices for other essential products are expected to rise in the coming months.
Vesti.ua They tell us which products are currently and will become more expensive in the future in Ukraine.
Almost everything is getting more expensive
According to the State Statistics Service of Ukraine, food prices increased by 1,4% in January compared to December 2020 and by 5,9% year-on-year. The State Statistics Service report shows that almost everything has become more expensive in the first two months of 2021.
For example, sugar, which cost 20,9 UAH in January, increased by exactly one hryvnia the following month. This also applies to wheat bread (from 21 UAH to 22 UAH) and sunflower oil (from 42 UAH/l to 44 UAH/l). Frozen fish also increased in price by one hryvnia (from 80,8 UAH/kg to 81,9 UAH/kg) and first-grade sausage (from 103,9 UAH/kg to 104,7 UAH/kg). The price of borscht also soared over the month—from 66,7 UAH/kg in February to 67,7 UAH/kg—in other words, by a whole hryvnia.
However, this price increase is still cheaper than last winter. Experts attribute the increase in vegetable prices to seasonality.
But the biggest price increase was for chicken eggs: while in January a dozen eggs could be purchased for 27 hryvnias per dozen, as of March the price exceeded 33 hryvnias. This is an increase of almost 20%. Chicken fillet prices increased by almost 2 hryvnias (from 91 hryvnias per kg to 93 hryvnias per kg). Lard increased by three hryvnias (from 79 hryvnias per kg to 82 hryvnias per kg).
At the same time, there have been slight price drops for some products over the past two months. For example, milk has fallen by 20 kopecks (from 25,6 to 25,4 UAH/liter), and the price of some seasonal fruits, such as oranges, has also dropped by 1-2 UAH per kilogram.
Food prices vary greatly year-over-year. For example, in January 2020, eggs cost 20,6 UAH per dozen. This represents a 13 UAH increase in price over the year. Salo (lard) would have cost 77 UAH per kg in January of last year (an increase of 4 UAH). Buckwheat has also increased in price over the year, soaring by almost 35% (from 27,77 UAH to 37,43 UAH per kg). Moreover, according to the State Statistics Service, buckwheat was sown on 81,600 hectares in 2020, a 15% (12,400 hectares) increase compared to 2019. Therefore, we should expect a slight decline in prices for this grain soon.
At the same time, chicken fillet became 10 hryvnia cheaper, and pork became 2 hryvnia cheaper.
Why has everything become more expensive?
Economists say the primary driver of price growth in recent months has been the increase in the minimum wage, which has stimulated demand. "In January, wages in 2021 increased by almost 16% compared to 2020. Prices have increased accordingly, and retail always adjusts to new wages," economist Oleksandr Okhrimenko tells Vesti.ua.
Furthermore, prices in Ukraine are also affected by the global rise in food prices. Our country is fully integrated into the global food market. This means that if, for example, sugar becomes more expensive globally, its price in Ukraine will also skyrocket. According to economist Oleg Penzin, sunflower oil prices have increased by 27,6% globally over the past year, grain by 15,1%, and milk by 8,8%—a nearly identical increase in food prices is observed in Ukraine.
The poor harvest also impacted the cost of several products in 2020. As a result, cereals were several hryvnias higher in December than in the same period in 2019. Experts say eggs also rose in price due to the poor harvest. Unstable raw material markets and rising prices for corn, wheat, and sunflower seeds have driven up the price of poultry feed, which accounts for up to 70-75% of the cost of eggs.
"Given these circumstances, farmers are afraid of running out of feed: some producers are reducing their poultry numbers, and some are even forced to close to wait out unpredictable fluctuations," said poultry expert Irina Boyko.
Experts say the pandemic itself didn't drive up prices, but it did bring many challenges. For example, closed borders created problems with food delivery, which led to higher prices for some products.
What will happen next
Economists currently forecast moderate growth in the consumer price index in 2021. By the end of the year, experts predict it will be approximately 6-6,5%. However, various risk factors could arise. For example, a possible hryvnia devaluation to 29,3-30 UAH/USD in the first half of 2021. Another risk factor could be rising prices in global commodity markets, such as oil and gas. Another factor is rising electricity costs. If all these factors influence the index, consumer prices could rise by 7-8% by the end of 2021.
However, food prices aren't expected to rise significantly in the coming months. "Don't expect any significant price increases. Salaries have already gone up. Things will level out soon. Yes, consumers are currently complaining that their pension and salary increases aren't keeping up with rising prices, but that won't last long," says Okhrimenko. However, he adds that while it's cold outside, prices won't fall, but they won't rise significantly either.
According to him, a slight price increase will be observed before Easter, which Catholics celebrate on April 4 this year, and Orthodox Christians on May 2. Traditionally, eggs and flour will go up in price. The so-called "barbecue set" will likely also increase in price during the spring picnic season.
Fresh vegetables will become significantly more expensive—experts predict monthly price increases of at least 2-3%. Borscht vegetables will increase in price by 10-15% until May, when freshly grown produce begins to arrive on the market.
Experts say this price increase is seasonal. After the holidays, prices for these products will fall again and may even be lower than before Easter due to a sharp decline in demand. However, according to economist Oleksiy Doroshenko, the price increase for flour, pasta, baked goods, and grains may continue after the holidays. For example, the cost of grains in general will increase as Ukrainians begin buying cheaper millet, peas, and barley in addition to buckwheat.
However, the government is concerned about a potential sugar shortage in the country, so the Cabinet of Ministers has announced sugar imports due to a poor beet harvest this year. Furthermore, there may be a grain shortage—in 2020, Ukraine actively exported grains, such as corn. The authorities have stated their intention to strictly control grain exports until the new harvest.
The Ministry of Economy says there will be no return to state price regulation. Speculation was also fueled by this, creating artificial shortages, so now all hope lies in a good future harvest.
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