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May 9, 2022
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Time for Europe to stock up on pasta before prices skyrocket

Time for Europe to stock up on pasta before prices skyrocket

Photo: Vladimir Gorovykh/TASS

UN Secretary General António Guterres called for the return of fertilizers and food products from Russia, Belarus and Ukraine to world markets. According to Guterres, this must be done despite the difficult economic and geopolitical situation, otherwise, the risks of a food crisis in the world increase. For his part, the UN Secretary General promised to make every effort to implement this initiative.

Earlier, the EU authorities imposed a ban on the import of fertilizers and timber from Russia as part of the fifth package of sanctions due to the events in Ukraine. The restrictions do not apply to deliveries before July 10 under contracts concluded before April 9 this year, according to the Official Journal of the EU.

Food supplies from Ukraine may be disrupted due to a special operation that jeopardizes sowing in part of the territories, including due to a shortage of fuel and lubricants. The UN has already reported that 4.5 million tons of grain are delayed in the ports of Ukraine, and predict that against this background, world food prices in 2022 will increase by almost 23%, and for vegetable oils – up to 30%.

Under the biggest blow were grain and vegetable oil – the key agricultural exports of both Ukraine and Russia. In the case of Ukraine, grains account for more than 55% of food supplies to other countries in monetary terms, and more than 25% for oil and fat products. For Russia, these figures are 30% and 20%, respectively. Before the start of the special operation, Ukraine exported 5 million tons of grain per month through the ports of Odessa and Nikolaev. In April, according to preliminary estimates, it was possible to take out only about 700 thousand tons.

Another main crop for Ukraine, which is less represented in the Russian Federation, is corn. Its main consumers are the EU and China.

According to the Institute of Agrarian Economics, the main buyers of agricultural products from Ukraine in 2021 were India (1.95 billion dollars), the Netherlands (1.7 billion), Egypt (1.6 billion), Turkey (1.4 billion), Spain (1.2 billion), Poland (1 billion), Germany (850 million), Italy and Indonesia (700 million each).

As for Russia, the geography is as follows: EU (4.4 billion), Turkey (4.3 billion), China (3.5 billion), Kazakhstan (2.7 billion), South Korea (2.4 billion .), Egypt (1.8 billion) and others. According to Russian farmers, food exports from Russia dipped in March due to logistics problems, but today shipments and the conclusion of new contracts are proceeding as usual, although payment difficulties remain due to banking sanctions.

A separate problem for Europe is the ban on the import of fertilizers from Russia and Belarus. Not only will they receive less food from Ukraine, but their own will grow less than expected. The topic of sanctions affecting the supply of potash fertilizers was raised by the President of Belarus in an interview with the Associated Press on May 5 Alexander Lukashenko.

“In Europe, America, for example, we are blocked on the supply of Belarusian mineral fertilizers. Well, listen, in America they are in great demand today. Prices have crept not only for oil, gas and mineral fertilizers, but also for food. Even more so in Europe. Why do we, like fools, rest our heads against each other and start bludgeoning each other with sanctions?” he said.

According to Lukashenka, Lithuania and Latvia have closed ports for Belarusian cargo, but they have shifted their focus to Russia and ship there, including potassium.

Soil scientist, Academician of the Russian Academy of Sciences, Doctor of Agricultural Sciences Petr Chekmarev told “SP” that the sowing campaign in Europe began a month ago, and there is not enough fertilizer. According to the scientist, this will not lead to hunger, but there will be a lack of a number of products, for example, corn.

– Fertilizers, first of all, affect crop production – the production of grain, oilseeds, vegetables, sugar beets. These are the main consumers of mineral fertilizers. If their quantity is not applied in the required volumes, there will be a decrease in yields for these crops. On which crops the Europeans will save, we do not yet know.

“SP”: – Is there an alternative to Russian fertilizers?

– An alternative may arise in the future, when the logistics chains are rebuilt. But it’s not that easy. Fertilizers are ordered in advance so that they are delivered by a certain date. They are introduced either in the autumn for the next harvest or in the spring before sowing, and they are also fertilized, mainly with nitrogen fertilizers.

The Europeans do not have a stock of past years, because fertilizers are not stored for a long time. They cake, lose their qualities, and nitrogen fertilizers are also explosive. Remember how ammonium nitrate exploded in the port of Beirut, and almost half the city was demolished. Nobody wants such risks of storing mineral fertilizers.

As for the natural fertility of the soil, of course, it can be sown without fertilizers. But the yield will be much lower, sometimes twice. Natural fertility does not provide the same opportunities for obtaining a high yield as the use of mineral fertilizers.

However, as experts say, there will be no hunger or even empty shelves in European stores, but there will be a rise in food prices by tens of percent.

“You need to understand that Europe, especially Western Europe, are rich countries, and in conditions of food shortages, only an increase in its cost will affect them,” says Associate Professor of the Department of World Finance of the Financial University under the Government of the Russian Federation Lazar Badalov. “Europe will be able to provide for itself simply because it will be ready to buy products at the highest prices.

But for Africa, the Middle East and Asian countries, food shortages can turn into much more serious problems, up to the onset of famine.

It is difficult to predict how much prices will rise in Europe, but it is already clear that the growth will be far beyond the norm. We are not talking about any inflation up to 10%, these will be much more significant figures.

Former Deputy Minister of Agriculture of the Russian Federation, Doctor of Economics Leonid Kholod recalled that Europe itself is a major producer and net exporter of agricultural products, but will inevitably feel its own sanctions.

– Europeans import certain categories of products, but let me remind you that the EU uses subsidy programs to limit agricultural production. Therefore, they have a production reserve, and food shortages in Europe are hardly real.

However, restrictions on fertilizer supplies could backfire on the EU. So far, fertilizers have not been embargoed; the Americans have put them on the list of non-sanctioned products. But there are logistical and settlement difficulties with deliveries.

The Russian Federation itself for some period also does not welcome the export of fertilizers. Meanwhile, the Russian Federation accounts for about 20% of mineral fertilizers on the international market and about 40% on the European one. Undersupply of such a volume will lead to an increase in the price.

Of course, the shortage of fertilizers in the EU will lead to lower yields. This does not mean that the shelves of the Europeans will be empty. This means that supply will decrease and prices will skyrocket. And not only in Europe, but also in the world. The same France ranks 3rd-4th in the world in terms of production of soft wheat. Rising grain prices lead to higher prices for livestock products, and so on down the chain.

“SP”: – And what about the supply of, say, durum wheat from Ukraine, do the Europeans have something to replace them with?

– This is a serious problem. Russia and Ukraine supplied about 30% of grains and oilseeds to the world market. But you need to understand that this is not the entire volume of food consumed in the world, but what is freely circulated in world trade, that is, surpluses. Due to these surpluses, not the richest countries from Bangladesh to Egypt were fed. Their dependence on supplies from the northern Black Sea region could be up to 80%.

In 2021, there are 25% more hungry people on the planet than in 2020. Almost 193 million people in 53 countries are on the verge of life and death. Somalia received more than 90% of its wheat from Russia and Ukraine, the Democratic Republic of the Congo – 80%.

As with fertilizers, the imbalance leads to higher prices for grain, which is at the heart of all price scaling in the food market. Already at the end of February, grain prices increased by 22% over the week. A further increase in prices will lead to cutting off the poor countries from the market. For rich countries, this threatens with an additional increase in prices in the region of 20%.

The biggest problem for Europe in connection with Ukraine will be oilseeds. Ukraine and Russia supplied about 80% of sunflower oil to Europe. I will make a reservation that they do not consume this product so much, other oils are traditionally more common in them. However, there is a share of consumption. And undersupply of 80% will still lead to higher prices and the search for alternative sources of supply.

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