Russian Food Suppliers Have Begun Halting Shipments

Until now, when it comes to the fallout in the Russian economy from the crude price plunge leading to a collapse in the Russian currency, most of the interest has been on how the Russian financial system recovers and/or survives and just as importantly, what Putin’s response would be. Just yesterday, we wrote that as a result of capital controls fears, many western banks led by Goldman Sachs had halted liquidity to Russian clients and other local entities.

However while the adverse impact on the Russian banking system has been mostly confined to the upper class – since there is virtually no middle class in the country to speak of – the second cold war of words, which rapidly morphed into a very hot financial war, is about to hit the very ordinary Russian on the street, because as Russia’s Vedomosti reports, citing vegetable producer Belaya Dacha, juice maker Sady Pridoniya and others, Russian suppliers are suspending food shipments to stores because of unpredictable FX movements. And it is about to get worse: very soon Russians may have to live without imported alcohol because at least on supplier of offshore booze, Simple, halted shipments in “a two-day pause” to see what happens with the ruble, Vedomosti reports.

The full story from Vedomosti:

Food retailers are faced with a halt in the supply of deliveries, according to both suppliers and retailers. The main reason – the jumps in the currency jumps and the devaluation of the ruble, which makes it impossible to plan activities in the current environment.

 

The largest domestic producer of juices “Gardens of the Don” has suspended shipment of products at the old prices to a number of trading companies due to the sharp depreciation of the ruble, the company said. The reason is that the cost of its products is more than 70% denominated in foreign currencies.

Gardens of the Don will ship products “first of all to all network companies who understand the situation and accept the new prices.” From 16 to 21 December 2014 the company has suspended shipping to merchants who did not give a definitive answer on the adoption of higher prices, explained the producer of such juices as “Gardens of the Don” “Golden Russia” “My” “Juicy world” and others.

 

Shipments were also stopped by a major distributor and importer of alcohol, Simple, told “Vedomosti” an employee of a major retailer. He was informed yesterday that the Simple warehouse would be closed. A company representative confirmed the suspension: the company took “a two-day pause.”

 

“We, as a company that depends on the value of currencies, can do nothing in this situation. We are putting prices in rubles, prices in Uslovniye Yedintsy (UY) or ‘conditional units’ are not acceptable under the current laws – reported a representative Simple CEO Maxim Kashirin. “Buying the currency now or taking out a bank loan, is impossible: banks will not finance receivables “.

 

According to him, restaurants and retailers will pay with a long delay, the federal network – up to several months.

 

Kashirin says that Simple hopes to resume the next day delivery, but “The decision will largely depend on what will happen on the foreign exchange market.” “If everything will fluctuate with the speed with which fluctuates now, we will not be able to give a long delay, great discounts. Most likely, we will be forced to sell, let’s say, on a prepaid basis” he fears.

 

Large fish suppliers that operate on imported raw materials, have also begun to suspend deliveries. December 16 during the “Orgy” period in the foreign exchange market, the company suspended shipments to counterparties for one day, told “Vedomosti” employee of a large fishing company. According to him, the company now operates in normal mode, the issue of increasing prices is discussed.However, due to the sharp depreciation of the ruble with all counterparties company now works exclusively on a prepaid basis: “There are no delays.

And so on.

Which is why tomorrow’s annual address by Putin to the nation will be, as has been dubbed, his “moment of truth” because while patriotic fervor is still high and the population is willing to suffer runaway inflation for a short period of time, even the greatly suffered Russian population will meet its breaking point. The question is when, and whether that will take place before or after the US shale industry reaches its own breaking point, at which point Saudi Arabia will finally release the price of oil which it has, according to all the “supply-siders”, been holding back. Alas, as we and others have demonstrated, that breaking point will most certainly not come for many more months to come. Which means that Putin better find an alternative soon, because if and when the food (and vodka) of Russians’ is impaired, then things have a tendency to get very bad.

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