The agri-food sector braces for export deficits from Russia and Ukraine




March 01, 2022 — The destabilization of Ukraine by the Russian invasion has already had significant global consequences for the food industry. Talk to FoodIngredientsFirst, international agribusiness representatives share their predictions of the conflict’s growing repercussions, bolstered by new reports of Russia’s enhanced advances.

“Given the proximity and large volumes of our trading partners in Russia and Ukraine, and the possible exclusion of Russia from the market, a big problem here is that we will not be able to replace [deficiencies in exports from Russia and Ukraine] one-to-one”, remarks Pekka Pesonen, secretary general of the European agricultural association Copa-Cogeca.

“We have no other trading partner that would be so close and readily available with reasonably large volumes of the same size as these two nations,” he points out.

“We now have reason to expect that a coalition of our trading partners will be able to help offset the impact with their trading volumes. We are losing two great partners, but replacing them with multiple partners in other parts of the world. »

Ukraine is the EU’s fourth-largest external food supplier and supplies the bloc with a quarter of its grain and vegetable oil imports, including almost half of its maize.Industry prepares for impact
In particular, Ukraine and Russia are key agricultural exporters to the global market. Ukraine is the EU’s fourth-largest external food supplier and supplies the bloc with a quarter of its grain and vegetable oil imports, including almost half of its maize.

“In the case of wheat, we expect that, to some extent, it will be possible to source the raw material from Australia and South America, as well as from Canada, which is already part of our agreement. bilateral trade,” says Pesonen.

Major grain traders are bracing for potential volatility and danger. Jackie Anderson, director of external communications for agribusiness giant ADM, says FoodIngredientsFirst“We are actively monitoring the situation and continually keeping the safety of our colleagues as our top priority wherever we operate.”

“Currently, our facilities in Ukraine are not operating, in accordance with safety protocols and government guidelines. ADM will use the full extent of our global and integrated supply chain to meet the needs of our customers around the world as we manage this difficult situation.”

ADM employs more than 630 people in Ukraine and operates an oilseed crushing plant in Chornomorsk, a grain terminal in the port of Odessa, five indoor silos, a river silo and a commercial office in Kyiv.

Other key agribusiness players such as Olam Group continue to closely monitor developments in Ukraine and Russia.

Consumers bear the brunt of penalties
Pesonen reports that there has been significant panic among Russian consumers, particularly regarding cash.

Last week, the United States and EU countries announced the expulsion of “certain Russian banks” from the SWIFT banking system – the high security network that connects thousands of financial institutions around the world – s pledging to “collectively guarantee that this war is a strategic failure”. for [Russian President Vladimir] Putin.

“The stock exchange was closed and the ruble exchange rate fell,” he notes. “We are seeing backlash from consumers and also from our trade organizations who have canceled their shipments because they have not received enough credit or insurance to cover their exports.”

“A colleague of ours in Portugal said he had to cancel his shipments due to the current situation. We expect that the complete shutdown of SWIFT for the Russians will eventually have serious consequences.”

Pesonen reports that there has been significant panic among Russian consumers, particularly regarding cash.Pesonen points out that Copa-Cogeca is currently monitoring the situation closely and following these developments with its members across the European agri-food chain.

“Depending on the situation, we would ask for market management measures to be activated in the EU,” he says. “I think the situation is very volatile. We don’t have the full picture yet so I think it’s essential to monitor the situation.

“But it is worth pointing out that during the COVID-19 crisis, the agricultural sector – not only in Europe but also internationally – has shown remarkable resilience. We are quite optimistic that some of these imbalances could be compensated by our normal actions in the market and possibly with the involvement of market operators at the institutional level.

Industry supports Ukraine
At a meeting last week, all Copa-Cogeca members expressed their solidarity with Ukrainian civilians, fellow farmers and colleagues from agricultural cooperatives in the conflict region.

“Our solidarity does not stop at words, Copa and Cogeca will put in place concrete actions in the days and weeks to come following the evolution of the conflict”, assures the group. “While the issue of energy supply is now clearly on everyone’s mind and on everyone’s lips, agriculture is just as strategically important.

“For the farming community in the EU, which has demonstrated both a key role and its resilience during the pandemic, this crisis comes on top of that of COVID-19 and the sharp increase in prices of all major agricultural inputs. (such as energy, feed and fertilizer) in recent months,” the coalition says.

“In times of war, the focus on food security becomes critically important and it is essential to take the necessary steps from the start to ensure that food supplies continue to reach those most affected in Ukraine. And in the world. Now is the time to further strengthen united European and international cooperation.

One of the most unpredictable aspects of a grain crisis caused by war or sanctions between Russia and the West involves China, FoodIngredientsFirst Previously reported. This is because China has huge reserve stocks of wheat and it is currently difficult to estimate exactly how much it has.

The United States Department of Agriculture estimates that China has about 140 million metric tons of wheat stocks held for consumption, which would be about half of the world total.

British consumers have called on local supermarkets to show solidarity with Ukraine by removing Soviet-era spelling on packaging for chicken kiev.Solidarity advertising
This week, British consumers called on local supermarkets to show solidarity with Ukraine by removing Soviet-era spelling from packaging of chicken kievs.

On Twitter, netizens pointed out that “Kiev” is the standardized spelling of Kiev under Soviet rule. However, recent Russian aggression has forced Western calls to drop it in favor of the Ukrainian spelling.

Today, young Ukrainians regard “Kiev” as a vestige of Soviet history. “Please immediately rename chicken Kiev chicken to Kiev out of respect for Ukraine,” one Twitter user wrote. Another called it “a small gesture of solidarity with our Ukrainian friends”.

In 2018, the Ukrainian government launched a “KyivNotKiev” campaign to address this semantic debate.

Ocado, Waitrose, Tesco, Sainsbury’s, Coop, Aldi, Lidl, Morrisons and Asda were among the supermarkets called into action. The grocery chains have yet to issue statements in response.

By Benjamin Ferrer

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