Food prices to increase 20% in H2 2009

Prices of basic foods will increase 15-20% in the second half of 2009, even as prices have increased around 18% compared to October, said Ştefan Niculae, chairman of the Agrostar Federation.

The price hikes expected to happen in June-July are caused by the elimination of state subsidies for producers, which are now forced to raise prices to cover their production costs, with another factor being the cartel policy of hypermarkets, which raised prices without a valid reason, "Agrostar" officials said.

As such, pig and poultry breeders, as well as milk and grain producers will no longer be allowed to receive government subsidies this year, which will make their products the first to see price hikes.

At the same time, starting this January, milk producers will no longer receive the milk quality subsidy, which is why they were forced to raise their prices slightly, however this price hike is nowhere near enough to justify the 25-55% price hikes operated by supermarkets (depending on which milk processors they buy their milk from), Ştefan Nicolae said.

Under these circumstances, milk will increasingly imported from other countries where governments continue to subsidize farmers.

• The price of bread to rise starting in March

Once the reserves of domestically produced of wheat are depleted by the end of March, will cause bakers to import wheat, causing prices to rise by 7-8%, Agrostar official says.

Romania is no longer allowed to subsidize farmers due to the regulations imposed by the European Union, said Ştefan Nicolae, who feels that instead of spending all their time on electoral campaigns, politicians should have lobbied since last year in favor of continued aid for Romanian farmers by other means.

Given the circumstances, food prices will continue to rise leading to lower consumption, which could bankrupt many producers. This would cause imports of basic food products and foods to surge, the leader of Agrostar, said, adding: "One thing is certain, importers will surely see their business swell!".

Mr. Nicolae added that any bankruptcies of domestic producers will not only cause a loss of jobs, but will also cause many investments in various sectors such as poultry breeding (which saw investments of over 300 million Euros from European funds), to go to waste.