Ukraine COVER STORY
The Ukraine situation
The war in Ukraine is a humanitarian catastrophe, and yet the NFU also has to view it through the lens of its impact on agriculture. If you're not sure what that means for farmers, NFU Agrifood Policy Delivery Manager Jack Watts looks at the situation as of 12 April 2022. What is the current situation?
The onset of the war in Ukraine led to huge volatility in grain prices with Black Sea exports essentially cut off from the world. During the past 25 years, the Black Sea region has become a dominant source of grain for the world, with Russia and Ukraine accounting for 30% of world wheat exports and Ukraine 15% of maize exports. Huge uncertainty remains about how much grain Ukraine will produce and export from the 2022 harvest. It is important to consider, though, that grain prices haven’t experienced the same levels of inflation as gas or fertiliser. The war itself and resulting sanctions placed upon Russia have clearly driven inflation in energy markets alongside huge volatility. Yearon-year, gas prices have increased by
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500%, with a 40% increase since the beginning of the war. In early March, gas markets saw a huge surge with prices increasing by almost 200% in two weeks. Whilst things are a little
Gas prices have increased by 40% since the beginning of the war calmer now, markets remain uncertain and vulnerable to unfolding events. The volatility and uncertainty in gas prices is spilling over into fertiliser prices and it is evident now that both cost and availability are going to be real issues for any remaining 2022 needs and those of 2023. The UK is reliant on fertiliser
imports from Europe to complement domestic production, but there is huge uncertainty as to when European capacity will come back online at scale. Feed raw material markets also remain on edge, not least also because we are into the Northern Hemisphere growing season, on top of all the uncertainty about what level of production Ukraine will deliver in 2022.
What should businesses be thinking about?
Agriculture’s cost base is clearly in new territory and it’s important for businesses to consider carefully what this means to manage the elevated risk to working capital tied up in production. Key to this is identifying where previously marginal production has become uneconomic
May 2022
12/04/2022 11:51:12
