Why do prices grow in Armenia?

PanARMENIAN.Net - Nevertheless, a good harvest of grapes is expected this year – around 215,000t against 85,000t last year. Besides, a considerable growth is expected in sales of meat foods. Meanwhile, 50% growth was recorded in the poultry field and egg production during the first half of 2010.

There is a progress in seed production, as the Armenian government approved a program on development of seed production in Armenia for 2010-2014 at the amount of AMD 558mln. The program basically aims to expand cultivation areas of wheat up to 115,000-120,000 ha, on which 400,000t of wheat will be produced per year. This will allow increasing the level of wheat provision in the country from 37% to 55%.Wheat seeds will be provided to enterprises for free, and in a year of reproduction the enterprises will be obliged to return the harvest at 1/2 ratio. Force majeure will be foreseen in agreements to be signed with enterprises, and seeds will be provided to those enterprises, which are ready to allocate a land plot of 3ha complying with the norms envisaged by the agreement.

Nevertheless, prices for wheat are growing in the global market of grains, what is conditioned by draught. Currently, the entire world is facing this problem: according to a report of the UN, 40% growth is expected in prices for grains. A certain expectation is observed also among Armenian companies with respect to increase in prices for flour. Meanwhile, prices for flour and bakery products will grow inevitably, as prices for flour are defined by the market and the volume of flour production is still insufficient in Armenia. The Ministry of Agriculture is actively cooperating with the State Committee for the Protection of Economic Competition to prevent baseless increase in prices for flour.

The State Committee for the Protection of Economic Competition (SCPEC) has fined six enterprises dealing with production and sale of eggs. An AMD 500,000 fine has been imposed on each of the companies for the absence of expiration date on eggs. It should be noted that, as a result of monitoring conducted by the Committee in June 2010, drop in prices for eggs was revealed and administrative proceedings were initiated with respect to it. The results of the conducted analysis indicate growth in production volumes, while sharp drop in prices for eggs has been observed since April, with its peak in May-June, when enterprises suffered huge losses as a result of overproduction. According to data of the RA National Statistical Service, the growth rates in egg production increased by 30% that has naturally had an impact on the price policy. However, data provided by enterprises with respect to production volumes is 2 times lower. Taking into consideration the fact that Armenia is neither exporting nor importing eggs for several years, one can state that eggs production is aimed at the local market supply. Besides, facts of coincidence of the price policy of six enterprises dealing with production and sale of eggs were revealed one day apart. Nevertheless, SCPEC has not managed to record dumping at this market. And this will serve as a lesson to Armenian producers of eggs, which will make them study the product market more thoroughly.

A strange trend with growth in prices is observed in Grand Candy company, which increased its prices for ice-cream. 10% average growth was recorded in prices for ice-cream produced by the company. Meanwhile, the company explained it by the fact that prices for basic raw materials, which are purchased from Belarus for ice-cream production, started growing from March. Specifically, increase was recorded in prices for milk powder and dairy butter. The prices continue growing in Belarus, what naturally has had an impact on the company's products. The company hopes that the situation will stabilize in the near future, as the market of Belarus is the most acceptable one by its quality. Meanwhile, Ashtarak-Kat CJSC was unable to answer the question on increase in prices for dairy raw materials.

According to data of the RA National Statistical Service, 0.8% deflation was recorded in Armenia in July as compared with June; nevertheless, it is unclear why prices continue growing.