Food in abundance and yet panic – Businesses

The war in Ukraine does not automatically lead to international famine. Because there is enough food, even without the ‘world grain magazine’. The real problems are a weak market and disrupted logistics, which makes food unnecessarily expensive and does not reach where it is needed.

The alarm cries about the impending food shortage surprise the experts. For they agree: there is still enough food for the whole world despite the war in Ukraine. The Agricultural University of Wageningen in the Netherlands recently carried out an analysis of food safety. The authors repeatedly emphasize that there is sufficient food worldwide, except possibly in the war zone of Ukraine. “Some products may become scarce. But it is not a threat to food safety because there are often alternatives available,” their report says.

The alarm cries about the impending food shortage surprise the experts. For they agree: there is still enough food for the whole world despite the war in Ukraine. The Agricultural University of Wageningen in the Netherlands recently carried out an analysis of food safety. The authors repeatedly emphasize that there is sufficient food worldwide, except possibly in the war zone of Ukraine. “Some products may become scarce. But it is not a threat to food safety because there are often alternatives available,” their report says. Recent figures from the European Commission and the US Department of Agriculture (see table) indicate a stable market. Global production of grain, humanity’s main food source, is expected to improve slightly. Russia even assumes an excellent harvest. The EU certainly does not need to be afraid of food shortages. Europe has already been able to absorb various food shocks thanks to the common agricultural policy. The European Union is self-sufficient in most products, except for exotic fruits, coffee, tea, oilseeds, natural oils and fats. The European Union therefore does not have to pull everything out for a massive increase in cereal cultivation. The agricultural area for cereals is expected to increase by less than 1 million hectares for the 2022-2023 season, just under 2 percent. Exports of grain from Ukraine may have largely stopped, but that is not really a problem. The country produces only 2 percent of all grain in the world. The Wageningen researchers also confirm this. “Ukraine’s share is limited. Less or no grain production in Ukraine is a setback, but it does not lead to greater shortages in the world.” What applies worldwide is also confirmed in Belgium. They note this at Arvesta, the Belgian market leader in agricultural supplies and a subsidiary of the commercial division of Boerenbond. “The area of ​​winter wheat has remained almost the same as last year,” said spokeswoman Stéphanie Deleul. “The crisis in Ukraine started in February, but the wheat in Belgium is mainly winter wheat. It was sown in autumn and in late 2021. Although the area of ​​summer cereals has increased by 10 to 15 percent, the effect is very limited., Due to the limited sowing area in our country. Most farmers had already made their sowing plan and have complied with it. Only a few farmers have sown extra due to the higher grain prices. ” In addition, world grain stocks are still well above the critical threshold of 20 percent. This means that countries have at least one-fifth of what they consume in a season as strategic stocks. Even better: the European Commission expects 45 million tonnes of grain stocks after the summer. That’s 7 percent more than at the end of the previous season. The panic and unrest in the market is unfounded based on the available stocks, the researchers at Wageningen Agricultural University conclude. But that panic and unrest exists, which sometimes results in large price increases for some crops. To understand this, we need to look at how the markets for agricultural commodities work. Most of the cereals grown remain within the major trading blocs, such as the EU and North America. A large part is traded under fixed contracts. What comes on the world market is actually the leftovers. Just under 18 percent of global grain production will be traded internationally this season (see table). For wheat it is a little more, a quarter. “The world market is a surplus market”, Piet Vanthemsche grumbled more than once when he was still chairman of the Boerenbond. The surplus market is very volatile. Agricultural markets are rarely in equilibrium and are slightly unbalanced. The demand for food is relatively stable, which means that small shortages or surpluses lead to large price effects. Adjusting the offer also takes a lot of time. The problem is that many low-income countries are very dependent on this residual market. For example, Egypt, Indonesia, Bangladesh, Turkey and Yemen are heavily dependent on Ukraine and Russia. Despite its small share of world production, Ukraine also has a relatively large share of world trade. For wheat it is 9 percent, for corn 15 percent. “Ukraine is a major supplier to the world market for these cereals. A disruption of that supply has significant consequences for international market prices,” warns Wageningen researchers. For the looming famine has everything to do with rising food prices. In poor countries, a very large proportion of income went to food even before the current crisis. How can food prices fall again? Especially with better logistics (see also page 18). “Prices are high because the whole market has been disrupted,” said Xavier Van den Avenne, CEO of the Water Avenne Agricultural Group. “The story is similar to that of oil. There’s enough oil, but it still costs about $ 110 a barrel because some countries are pumping less. It makes the market very nervous. The logistical flows of commodities need to change. Until now, one country bought its agricultural products, where “It was most convenient. But where do you get the grain: from Ukraine or North America? Such a change also inevitably leads to higher transport costs.” Grain exports from Ukrainian ports have been largely blocked by the war. Some are brought by train to Romania and exported there from the port of Constanta. But it is unclear whether these are significant quantities. Exports from Russia are still going on. For example, flaxseed and wheat are supplied to those who have entered into contracts. These agricultural products are transported through the ports of St. Petersburg and the ports on the Black Sea. Turkey, which is heavily dependent on Russian grain, blocked the Bosphorus region from military transport, but not from grain. Because food should not be used as a political weapon, the motivation is. Russia produces 4 percent of all grain in the world. That worries Xavier Van den Avenne. “What will Putin do? Will he use grain exports as a strategic weapon? The Russian president is capable of anything. I therefore expect only a gradual fall in prices in the coming months. Moreover, prices will normally only be for summer. , and that means that prices will only fall in the coming months.in the harvest months clearly This explains the nervousness in the market There is uncertainty about the harvest expectations, also due to the drought in Western Europe While eg winter wheat is in a critical growth phase around this time Fortunately, we have now We have had some rain for a few days, which has already lowered the price of wheat. ” Xavier Van den Avenne also notes “a lot of speculation in that market. Many investors are buying a basket of agricultural commodities.” Researchers in Wageningen are more reserved about speculation. “Has speculation contributed to the price increases? There can be no good evidence for this.” There were also sky-high food prices in 2007 and 2008. These were then boosted by ‘food in the tank’: the use of cereals for biofuel production. Even today, there are votes in favor of a temporary ban on biofuels. The European Commission does not currently accept that scenario. This season, 12 million tonnes, or less than 4 percent of European grain, will go to biofuels. 11 million tons are planned for the season 2022-2023, a little more than 3 percent of the total. Vanden Avenne owns 29 percent of the shares in Alco Bio Fuel. This company produces bioethanol from maize in the port of Ghent. “For bioethanol production in Europe, only maize and wheat are used for animal feed,” says Xavier Van den Avenne. “In addition, Alco Bio Fuel not only produces ethanol, which is used as biofuel. One third of the production is protein for animal feed. It avoids soy production. If we stop using bioethanol, Europe would have to import extra soy. Ethanol will lead to a sharp rise in gasoline prices at the pump. ”

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