• Discussions in the political environment regarding the eventual capping of food prices have produced intense reactions from the food industry.
Recently, discussions have started in the Romanian political environment regarding a possible food price ceiling. This has provoked strong reactions from representatives of the food industry, while economists say it would lead to the emptying of store shelves like in the communist era.
Added to all this is the fact that Romania's budget, already at a standstill, is unable to cope with the freezing of food prices.
The vice-president of Chartered Financial Analyst Romania, Adrian Codirlașu, believes that a more appropriate measure would be the distribution of shopping vouchers to people with very low incomes.
"Why would a Romanian producer sell locally, at a low, capped price, when he could sell in the EU, at a higher price?"
Marcel Ciolacu, the president of the PSD, said that a project to cap the prices of basic foods will not be advanced before discussing with both hypermarkets and producers. These discussions will not be about forcing producers to sell below the production price, but will involve a possible compensation measure.
Adrian Codirlasu, the vice-president of CFA Romania points out: "The problem arises in the following way: why would a producer in Romania sell locally, at a low, capped price, when he could sell in the EU, at a higher price?" This is an important risk of capping, that the supply can disappear. This is what happened in communism when prices were low, only the products were not available, there was no offer".
He also states that: "In a centralized and closed economy, producers can indeed be forced to sell only on the local market, but in an open market it is extremely difficult to impose such a measure because they will go to export the products. We also see in Hungary that the offer has disappeared and rationalizations are starting to be introduced along with the prices set by the government".
Under these conditions, even importers would have no reason to bring products to Romania, if their price following the ceiling would be below the selling price or if the margin would be extremely small.
"In Hungary, the offer has disappeared and they are starting to introduce rationalizations"
In January, the Hungarian government decided to cap the prices of six basic products: sugar, wheat flour, sunflower oil, pork loin, chicken breast and milk with 2,8% fat.
Prime Minister Victor Orban justified this government measure by increasing energy prices.
At the same time, the Hungarian government decided to oblige large stores to always have basic products in stock. This measure led to rationalization in certain retail chains, so that a person can purchase 10 kg of sugar, 10 kg of flour, 10 liters of oil and 12 liters of milk in one purchase.
Adrian Codirlașu believes that "In Hungary in recent years, measures were taken that were not in support of the market economy, but on the contrary. Such measures, including the nationalization of private pension funds, have negative effects in the short and long term. For this reason, I would not see Hungary as an example for Romania to follow from this point of view."
The industry will not be able to sustain the losses
Roma food considers this capping an apparent and temporary calming of prices followed by "a cascade of persistent negative effects on the entire agri-food chain".
Romalimenta representatives confirm that: "food producers in Romania need stability, predictability and constant support from the decision-makers in order to continue their activity in this difficult situation, and the imposition of an artificial ceiling will only endanger their capacity to continue its activity. By adopting such a measure, there is the risk of a major food crisis, because the industry will not be able to bear the losses, many companies will cease their activity, and the population's food supply will be directly and immediately affected".
The adoption of the ceiling would lead to layoffs and closed companies, jeopardizing the population's supply of products, market shortages encouraging specula and the underground economy.
The representatives of Romalimenta also emphasize that the authorities have the necessary levers at their disposal, for example through the Price Monitor of the Competition Council, to sanction the economic operators who aim to profit unjustifiably and abusively from the current difficult situation.
Shopping vouchers for people with low incomes
While other economists point out that the budgetary impact is difficult to quantify at the moment, given that there is no clear data on the foods targeted by the caps and their consumption level, Adrian Codirlașu points out that "people with low incomes have were the most affected by price increases and need help. By granting vouchers, the state can make a difference and it could be an optimal solution also from the point of view of budgetary expenses."
Article written by Gabriela Dan, Editor of Arta Albă
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