In the second week of October, food prices kept going down: ISET’s Retail Food Price index lost 0.8% m/m (compared to the last week of September) and 15% y/y (compared to October 2015). The largest bi-weekly price changes were recorded for seasonal food products such as fresh fruit and vegetables. Prices moved down the most for coriander (-23%), onion (-8%), and cabbage (-6%). The biggest price increases were recorded for the following items: tomatoes (33%), eggplant (27%), and garlic (25%).

ALL ABOUT HARVEST

According to the October data, prices moved up for grapes by 44%, compared to the same period in 2015. As discussed in our last FPI article, one explanation of the movement in the price of grapes might be the so-called “base-year effect”. However, the Minister of Agriculture provided a better picture of the 2016 harvest in Georgia. Compared to the previous year, wine export volume from Georgia has increased by 35%. Along with the bad weather conditions, it is no longer surprising that grapes are significantly more expensive this year.

Table 1: Changes in Sugar and Grape Prices

SUGAR? YES, PLEASE!

Despite an overall downward trend in food prices, some products are becoming more expensive. One interesting case is sugar. Compared to the end of September, the price of sugar gained 8%. While people connect the price increase on sugar to the post-election environment (on October 8 parliamentary elections were held in Georgia), we need a better explanation for the significant 25% annual sugar price rise.

This price rise may be a result of higher domestic demand during the harvest season. On the one hand, autumn is all about preserving fruits and vegetables for winter, and sugar is “a must” in this process. On the other hand, sugar is still widely used in wine production in Georgia (in general, sugar is used for fermentation even in Bordeaux and Burgundy). This might be the case, particularly this year, because the harvest is not as high as normal, and Georgian farmers might want to increase their wine volume by adding water and extra sugar. In addition to this, the FAO sugar price index has also increased in September (by 6.7%). Bad news spreads fast: an increase in global prices transmits into higher domestic prices for sugar.