Sector News

Agri-food sector braces for export deficiencies from Russia and Ukraine

March 5, 2022
Food & Drink

The destabilization of Ukraine by the Russian invasion has already triggered significant global consequences for the food industry. Speaking to FoodIngredientsFirst, representatives of the international agri-food sector share their forecast of the widening repercussions of the conflict, heightened by new reports of Russia’s bolstered advances.

“Given the proximity and the big volumes of our trading partners in Russia and Ukraine, and possible exclusion of Russia from the marketplace, a big issue 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 European farming association Copa-Cogeca.

“We do not have any other trading partners that would be so close and readily available with reasonably big volumes of the same size as these two nations,” he stresses.

“We now have reason to expect that a coalition of our trading partners would be able to help offset the impact with their trading volumes. We’re losing two big partners, but replacing that with multiple partners in other parts of the world.”

Industry braces for impact
Notably, both Ukraine and Russia are key agricultural exporters for the global market. Ukraine is the EU’s fourth-biggest external food supplier and provides the bloc with a quarter of its cereal and vegetable oil imports, including nearly half of its maize.

“In the case of wheat, we expect that to a certain extent it’s possible to source this raw material from Australia and South America, as well as Canada, which is already within our bilateral trade agreement,” says Pesonen.

Major grain traders are preparing for potential volatility and danger. Jackie Anderson, director of external communications at agri-food giant ADM, tells FoodIngredientsFirst: “We are actively monitoring the situation, and continually keep the safety of our colleagues as our top priority wherever we operate.”

“Currently our facilities in Ukraine are not operating, following security protocols and government guidelines. ADM will use the full breadth of our global and integrated supply chain to support the needs of our customers around the world as we manage through 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 inland silos, one river silo and a trading office in Kiev.

Other key agri-food players such as Olam Group are continuing to keep a close eye on the developments in Ukraine and Russia.

Consumers bear the weight of sanctions
Pesonen flags that there has been significant panic among Russian consumers, particularly when it comes to cash.

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

“The stock exchange has been closed and the exchange rate for the Ruble has plummeted,” he notes. “We’re seeing negative reactions from consumers and also from our trading organizations who have canceled their shipments due to the fact that they haven’t received sufficient credit or insurance to cover their exports.”

“One of our colleagues in Portugal said that they’ve to cancel their shipments because of the ongoing situation. We would expect that the complete closure of SWIFT for the Russians will possibly have severe consequences.”

Pesonen emphasizes that Copa-Cogeca is currently monitoring the situation closely and following up on these developments with its members across Europe’s agri-food chain.

“Depending on the situation, we would call for market management measures to be activated in the EU,” he says. “I think the situation is very volatile. We do not have the full picture yet and therefore I think it is key to monitor the situation.”

“But it’s good to point out that during the COVID-19 crisis, the agriculture sector – not only in Europe but also internationally – showed remarkable resilience. We are quite optimistic that some of those imbalances could be offset by our normal market actions and possibly with the involvement of the market operators at an institutional level.”

Industry stands by Ukraine
During a meeting last week, all Copa-Cogeca members expressed their solidarity with the Ukrainian civilians, fellow farmers and agri-cooperative colleagues in the region of conflict.

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

“For the EU’s farming community, which has demonstrated both a key role and resilience during the pandemic, this crisis comes on top of the COVID-19 one and the sharp price increases of all major agricultural inputs (such as energy, feed and fertilizers) in recent months,” the coalition states.

“In times of war the focus on food security becomes of critical importance and it is essential to take the necessary steps early on to ensure that food supplies continue reaching those most affected, in the Ukraine and globally. This is the moment to further strengthen a 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 implicates China, FoodIngredientsFirst previously reported. This is due to the fact that China is sitting on huge reserve stocks of wheat and it is currently difficult to estimate exactly how much it owns.

The United States Department of Agriculture estimates that China has roughly 140 million metric tons of wheat stocks preserved for consumption, which would account for around half of the global total.

Advertising solidarity
This week, consumers in the UK called upon local supermarkets to express solidarity with Ukraine by removing Soviet-era spelling on packages of chicken kievs.

On Twitter, netizens emphasized that “Kiev” is the standardized spelling for Kyiv under Soviet rule. However, the recent Russian aggression has compelled Western calls to abandon it in favor of the Ukrainian spelling.

Young Ukrainians today view “Kiev” as a relic of Soviet history. “Please immediately rename chicken Kiev chicken as Kyiv in respect for Ukraine,” one Twitter user wrote. Another called it a “small gesture of solidarity to 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 to action. The grocery chains have yet to release statements in response.

By Benjamin Ferrer


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