The rise in food prices and the war in Ukraine

COVID-19, climate change, and now the undeniable Russian-Ukrainian conflict have guaranteed rapid inflation in Central Europe. Disruptions in supplies, sanctions imposed on Russia, and increased uncertainty are hampering the development of the economy. As a consequence, we can expect rising food prices. Do we have influence on some of these aspects? What can we expect in the near future? Which products will be the most expensive, and what availability may be a problem?

Time plays a significant role in war. The longer it lasts, the more consequences it brings. One of them is the deepening economic crisis, and the prolonged war time is increasing energy costs and increasing debt.

"The war in Ukraine, in all its dimensions, has the following cascading worrying effects on the world economy, which has already been hit by COVID-19 and climate change, with a particularly dramatic impact on developing countries," we can read in the April 13 report published by United Nations Conference on Trade and Development.

"In the latest forecasts UNCTAD Due to the war, which is seriously disrupting already tense food, energy and financial markets, it is estimated that the world economy will have a full percentage point lower than expected GDP growth. "

Important food exporters

Russia and Ukraine are significant exporters of grains, fodder raw materials and oilseeds, such as sunflower and rapeseed, worldwide. This means they cater to global markets with the most desirable products. The war caused the purchase prices of cereals to increase by 25-30 percent and will most likely continue to rise, which is a consequence of disruptions in plant production and its removal outside Ukraine. According to experts, the war also translates into an increase in the costs of agricultural production, i.e. fertilizer, fuel and energy. Considering that Russia and Belarus have limited their export supply.

Experts believe that if the agricultural season in Ukraine is delayed by several weeks and there is no solution to eliminate the disruptions, we may face large-scale consequences such as an apparent global recession, food shortages, limited supplies, and supply chain disruptions.

The agricultural industry in the time of crisis

Due to the fact that Ukrainian citizens fled the occupied state, this resulted in a significant shortage of manpower, especially in agricultural areas. In addition, agricultural production is limited due to the planting of bombs or land mines in the fields. This restricts the freedom of movement. The Russian-Ukrainian conflict also has an impact on logistical problems with food exports. The top-down ban on shipping ships to the Black Sea area exacerbates the problem.

Richard Kottmeyer of FTI Consulting, Inc. believes that 'there are many issues that we are not talking about when it comes to the general problems that may arise from the Ukrainian-Russian conflict, especially if it lasts for a year, two or three. And if the war ended today, food price inflation would continue for three more years. "