In three months after a violation of anti-competition norms in the Armenian market the state committee on protection of competition found out why the price of egg was drastically increased on the threshold of the New Year resulting in super-profits for a number of companies. At that time the price for one egg was increased up to 120 drams.
The mentioned committee concludes that this was a speculation in the Armenian market of eggs. It is the same thing as everybody was saying during those days. “I am inviting the head of the Armenian statistics service and the prime minister to take part in a lecture on macroeconomics. How can the price of a product grow so drastically if the number of the population is reducing and the production capacity of that product is increasing from 500 million to 700 million? It turns out that every person eats three eggs every day. It is impossible,” said former PM Hrant Bagratyan in January.
This case was very surprising, especially for those people who are good at calculations. According to the officials statistics, during the past year in Armenia over 719 million eggs were produced, which was more by 14% than in 2009. If we assume that this number also includes the eggs from the remote regions as well, it turns out that every person (including new birth children and old people) consume 20 eggs per month.
Does Armenia consume so many eggs? The official statistics has conducted a survey of consumed products, according to which every person in the country consumes 7.7 eggs a month. Egg is not one of those products that people start using more if they have more money. Even if we take into account that it is true for this case, hardly it is possible that people may eat more eggs up to reaching the limit of 20 eggs per person. This means that the eggs produced in Armenia fully meet the inner demands for this type of product.
In 2010 approximately 2.7 million eggs were exported from Armenia. However, as it may be very surprising we have imported 4.1 million eggs in the same year. It seems to be absurd to import the same product with bigger quantity in case if the inner production is enough for the demand and we still export, but everything becomes clear in consideration of the fact that 4 million out of those 4.1 million eggs were imported during the last quarter of the year, i.e. during the days of egg deficit in the country in December.
The reason, according to the producers, is the fact that the hens realized their right for refusing to lay eggs two months before the crisis and laid twice fewer eggs. According to the statistics, last year the average number of egg production per month was 60 million, this year the month of November was out of this statistics and the number of produced eggs was 27 million.
Of course everybody understands that it is not the fault of the hens but their owners. The committee on protection of competition has published information which reaffirms this fact. The web site of the committee writes that the committee has asked for information from the largest six companies in this market. “According to the information submitted to the committee by these six companies, on the days when the prices of the price of egg and the deficit were drastically growing the producers of egg had stored a lot of eggs in their warehouses, most of which belonged to the Poultry Company of Lusakert,” writes the statement of the committee.
In fact while the Armenian women were looking for eggs to make cakes for the New Year party, the owners of those companies were keeping the eggs in their warehouses in order to stimulate artificial deficit and raise the prices for the purpose of getting super-profits.
According to the committee, it is mainly the fault of the Lusakert Poultry Company. “In the period of December 23-27 of 2010, when there was a deficit of eggs in shops, the average stored number of eggs on part of producers was 4.506.849, 83% of which (3.763.838 eggs) was kept by the Lusakert Poultry company. This company provided the 52% of the supply on the part if the other 5 largest companies as well. In the last weeks of December, when there was an unsatisfied demand for eggs in the shops of Yerevan, the Lusakert Poultry Company failed to supply a part of its products to shops, i.e. failed to sell the whole produced capacity, which resulted in an artificial deficit. The committee informs that this information is supported also by the written notices sent by the largest supermarkets.
There is no need for comments. The committee finds that the decision not to sell the products resulted in a deficit and it was a manipulation for monopoly purposes, as a result of which the committee has decided to impose a penalty of 100 million drams on this company. The representative of this company was present at the session of the committee and disagreed with those observations. In answer to this compliant the head of the committee said that the committee had sent a letter informing the company about the results of their findings twenty days before that but had not received any answer to their letter. “If they had complaints, they would speak about it during these twenty days,” said the head of the committee.
We are ready to publish the answer of the Lusakert Poultry Company too if they agree to comment on this situation.
We will try to understand whether this 100 million is much or less for this kind of speculation. As it is mentioned above, in Armenia every month approximately 60 million eggs are produced. In November the companies reported about 27 million eggs. In December approximately 20 million eggs were sold, but during the last week of December, when the price reached 110-120 drams, 10 million eggs were sold. As the committee reports, this company provided approximately 52% of the entire production capacity of the 6 largest companies. This means that on the days of the deficit this company sold several million eggs for higher prices. On those days the price of one egg was higher by 50-60 drams. Even if the profit of those companies was less than the half of this surcharge, the penalty of 100 million is much less than their super-profits.
In fact these 6 companies, including the Poultry Company of Lusakert, are private companies and they have the goal to maximize their profits, even if it is done through a speculation for the purpose of getting super-profits. State institutions, including the committee on protection of competition, are the ones that have to stop such companies in time. In this situation it turns out that during the deficit the consumers suffered and had financial loss, but the compensation of that money was sent to the state budget. It turns out that from the prospective of providing financial inflows to the budget the state is interested in discovering violations later to impose penalties on companies.