Consequences of Price Regulation

Price Regulation can keep prices down but can also bring quantities down, as illustrated by two reactions of producers this week:

From BGCapital Daily Market Watch

"Kernel halts domestic sunflower oil sales

Kernel (KER PW) has temporarily halted domestic sales of bottled sunflower oil, APK-Inform reported, citing local players. The move comes in response to the Anti-Monopoly Committee’s recently announced investigations into reports of price collusion by the three largest oil producers in Ukraine (see news from January 24). Dmytro Ushenko: As we expected (see our Initiating Coverage report from December 16, 2010) Kernel looks to have chosen to redirect some volumes of sunflower oil from Ukraine to export markets in response to growing pressure from the regulator. We estimate that Kernel’s domestic bottled oil sales will fall 7% y/y and will account for 12% of the company’s total sunflower oil sales in 2011."


And

"Number of large producers stops selling buckwheat

According to the company representatives, the main reason for the emergency of this situation is the measures applied by state bodies for stabilization of the price situation on the market."


Start the queues for sunflower oil and buckwheat!