This year, the country threatens to be largely absent as a grain supplier.
(Photo: IMAGO/Ukrinform)
Munich, Dusseldorf The leading German agricultural traders are warning of further significant price increases for food. There is “no reason to rant about a famine in Germany and Europe,” said Klaus Josef Lutz, head of the market leader Baywa, on Thursday. However, consumers would have to be prepared for further increases in prices in the supermarkets.
The second largest German agricultural trader Agravis from Münster also expects this. CEO Dirk Köckler warned that the war in Ukraine and the associated increase in the cost of grain would lead to “significantly higher consumer prices”. After the last 200 euros per tonne, the grain price rose to sometimes 420 euros per tonne after the Russian attack.
The Ukraine and Russia account for about 30 percent of the world grain market. Russia has already largely stopped wheat exports in order to secure supplies for its own population and to avoid price increases.
In the past few days, farmers in the Ukraine have sowed seeds on fields as far as they could. But Baywa boss Lutz doubts whether it will be possible to harvest in the summer and sell the goods on international markets. On the one hand, work in the fields under wartime conditions is only possible to a limited extent. On the other hand, many Ukrainian men are not available for work in agriculture because they are serving in the military.
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This means that around 40 million hectares of cultivated land for the supply of grain are at risk. There will probably be significant losses simply because of the collapsed trade routes. Wheat from Ukraine is shipped from Black Sea ports that are under fire or already in the hands of the Russian military. According to unconfirmed information, the Russians recently hijacked five Ukrainian ships loaded with wheat.
The grain is mainly transported via the Black Sea to the Middle East and North Africa, which are easily accessible from there. Countries like Egypt and Lebanon obtain up to 80 percent of their wheat requirements from the two warring parties. These regions will face major food supply problems. Experts fear that famines are looming, especially in Africa – and could lead to unrest worldwide.
Consumer prices are rising in Germany
In Europe, on the other hand, there will be no shortages from the point of view of agricultural traders, but the EU will be in much greater demand as an exporter of wheat. In the interest of Europe as a whole, Baywa boss Lutz called for a unified reaction from the EU and criticized Hungarian Prime Minister Viktor Orban. Its government reserves the right to limit grain exports from its own country. Lutz accused Orban of breaching European law.
Although food is not becoming scarce in Germany, consumer prices for food and non-alcoholic beverages rose by 5.1 percent in February alone. In addition, the Ukraine is Germany’s most important supplier of sunflower oil. In some supermarkets, customers therefore bought up large quantities of vegetable oil in addition to flour, which led to empty shelves.
The agricultural trader expects a significant increase in food prices.
(Photo: imago/DeFodi)
Now the suppliers of honey and mustard are also warning of bottlenecks and price increases. For the foreseeable future, no deliveries will come from Ukraine, which is traditionally important for the honey supply. Half of the mustard seeds are sourced by German manufacturers from Russia and 27 percent from the Ukraine.
>> Read also: Ukraine war exacerbates shortages of mustard and honey
Fertilizers will remain expensive in the long term, which will further increase the cost pressure on domestic farmers. Baywa boss Lutz does not expect a quick relaxation. Because prices had at times almost tripled in the past year, many German farmers were reluctant to buy. As a result, they now have low inventories and keep demand high.
Expensive natural gas drove up prices for nitrogen fertilizers last year. Because this is obtained from ammonia, where natural gas accounts for a good 80 percent of the production costs. Fertilizer prices have increased again since the start of the Ukraine war and are currently three times as high as in summer 2021.
Fertilizer market is swept empty
This is also due to the fact that the market has been swept empty. Fertilizer producers such as Yara from Norway and Borealis from Austria have cut back their production because the expensive natural gas makes production uneconomical in some cases. Russia, on the other hand, no longer delivers any nitrogen fertilizer at all in order to secure the quantities for domestic agriculture. This is powerful, because the country is one of the largest exporters of plant nutrients.
A fertilizer bottleneck is not foreseeable in Germany. “We are able to deliver,” emphasized Lutz. Baywa has also now bought fertilizer from European production. “We can supply the farmers as far as we can.”
Agricultural board member Marcus Pöllinger added that wholesalers could continue to deliver. This applies until the end of the year, for 2023 you have to look further. One expects more rising prices or at best a stable development.
Baywa wants to benefit from the ability to deliver fertilizer this year. In 2021, the group’s sales increased by 20 percent to 19.8 billion euros. The operating result (EBIT) improved by 26 percent to 267 million euros.
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