Saturday, August 13, 2005

Economics Ukrainian style

This is what you get here a lot when talking about the price of things--someone somewhere is conspiring to raise it simply because they want to. Kyiv Weekly.

Particularly depressing is a drastic rise in the prices of poultry products in Ukraine, which is the most prosperous sector of the country's animal husbandry industry. But that is not the worst of it. Poultry farmers have decided to go a step further. One of the largest producers of poultry in Europe, the Myronivskiy Khliboproduct joint-stock company, which owns the trademark Nasha Ryaba chicken products, announced its intention of gradually raising the prices of poultry to the level of pork and beef. Not only is this a violation of the pricing agreement in the memorandum between the Cabinet of Ministers and the producers of poultry products. It is also another test for consumers...


Certainly, compensating the shortage of these products currently estimated at 400,000 tonnes with imported products can fill the market for a certain period and urb price growth. But many experts believe that a prolonged stabilization of the situation in the meat market and a drop in retail prices are possible only in the event that quotas are introduced on imported meat products and directing the proceeds from sales based on these quotas to developing the domestic livestock breeding industry...

The same sort of argument is made seriously here about gas prices. The Russians have refineries they have closed down ostensibly for them to be upgraded but the real reason is to cause a shortage and a rise in the price. The same sort of thing is said about grains and sugar each year; the traders are sitting on supplies to raise the price and then come into the market to make a killing.

To date, this kind of argument has been made for poultry, pork, gasoline, and wheat.

I guess it is possible for a couple of players to so dominate a market as to be able to control prices though I think that means a kind of coordination that I don't see as being a realistic possibility here. Maybe other places but not here. But even if this is the case, the response should not be more control, it should be to open up these markets to competition. But that isn't happening. The reason is that opening up markets would cause a lot of dislocation and that is the last thing the government would like to see. The problem though is that this kind of finessing of a soft landing doesn't seem to be doing anything but cause shortages and rising prices.


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