Price cap puts food producers under pressure

Russian government has submitted a bill to cap the prices of a long list of basic foodstuffs including bread, milk and sugar. But experts warn this will be a critical squeeze on Russia's food producers and retailers, suffering from double digit increases to their own costs due to Russia's spiraling inflation.

The amount and range of foodstuffs whose prices could be controlled by the state has shocked Russia's food producers and shops across the board: bread, milk, butter, tea, cooking oil, beef, pork, chicken, eggs, salt and sugar.

The Russian government may stop all these items from rising more than 3% for up to 6 months.

It comes at a time when food production prices for manufacturers are soaring. Fertilizer prices have already jumped 15% this year.

Russia's top juice and dairy producer Wimm-Bill-Dann revealed the financial cost it's suffered from the price freeze agreed to back in October. He begged the government not to extend the controls beyond the current deadline, already extended once this year from January to May 1.

Russia's President-elect Dmitry Medvedev claims he put no pressure on food producers to freeze their prices, but sent an ominous warning if they failed to cooperate in the future.

"The price freeze wasn't forced by government laws, it came from voluntary agreements between traders and food producers. And include only 10-15% of products. But the problem is foodstuffs make up a large proportion of Russian peoples' expenditure, and we just can't ignore that," Medvedev said.