The impact of the war in Ukraine on European farming will be felt for a significant period of time to come.
This is the very clear view of Thijs Geijer, an economist with Amsterdam-based bank, ING Research.
“There will be several major consequences for European farming and food, linked to the war in Ukraine. These will mostly impact on food processers and traders,” he said.
“Farmers are dealing mostly with the indirect effects. And these are the impacts on commodity prices and fertiliser.”
Geijer added:
“We have seen quite drastic increases in the price of grains and oilseeds over recent weeks. For now, it is really hard to say this how this issue will develop moving forward.
“This is because there are so many inter-dependencies in terms of how supply will develop in the future.
“There will be a reaction in the market. This is because there is so much supply that was supposed to go to the market and is now somewhere.
“And this is the big uncertainty.”
Food-production policies
According to Geijer, other regions of the world will adapt their food-production policies in light of what is happening in Ukraine.
He commented:
“This could include an increased production of grains and oilseeds, in order to alleviate the pressure on world markets.”
Geijer confirmed that Ukraine has stopped all exports of grain and oilseeds.
“At first, logistical reasons had come into play in this regard. But, afterwards, the government in Ukraine introduced legislation, which prohibited the export of certain food commodities,” he said.
“This was a case of ensuring the food supplies in the country remained there.”
Geijer went on to point out that both Australia and India have just enjoyed record grain harvests.
“So, in the short-term, countries that would normally be dependent on grain supply from Ukraine at this time of the year could turn to either India or Australia,” he commented.
“Every shipping slot from Australia has been booked for quite some months ahead.”
Making up the shortfall
“But the difficult question to answer right now is this: can these countries make up for a shortfall in Ukrainian grain supply, should this become a reality?”
Commenting on the prospects of grains and oilseeds being rationed for livestock-production purposes later in the year, Geijer said that the issue is very current.
“This matter was discussed in recent days by operators within the international grain-supply chains.
“As these events unfold, people will get a better sense of what is happening. In a sense, the countries that have these supplies, a lot will depend on them.”
He added:
“Will they decide to keep trade flows open? This matter has been discussed by member of the G7 over recent days.
“Potential exporting countries will want to ensure that their own food consumption needs are met. They will not want to import food inflation.”
But the ING economist also feels that price in the market place could become a ‘de facto’ rationing mechanism, where grains and oilseeds are concerned.
“He added:
“It is conceivable that commodity prices will rise to such an extent that farmers will not be able to use them on an economic basis.”