Over the last several months, farmers in Europe have been struggling to make a living from feeding their continent, and the war in Ukraine is expected to further strap the agricultural sector.
“EU farmers are facing the perfect storm: geopolitical tension, rising energy prices, and the post-pandemic economic crisis mean that the costs of fertilisers, seeds, fodder, transport, and distribution have shot up,” liberal Romanian MEP Vlad Gheorghe (Renew Europe party) said during a European parliamentary debate just days before Russia invaded Ukraine, Euractiv reported.
The Russian invasion of Ukraine is expected to make the situation worse, as both Ukraine and Russia are major suppliers of farming basics, such as fertilisers, which are integral to conventional agricultural commodities.
Fertiliser prices in Europe are especially “vulnerable to geopolitical risks,” sources in European Union institutions explained to Euractive, since the production of fertiliser relies upon the import of gas. Another source reminded Euractiv of the bad repercussions of EU sanctions on Russia in 2014 in the agricultural sector.
According to Bloomberg intelligence, U.S. sanctions against Russian fertiliser producers, who rank among the world’s lowest-cost suppliers, would likely raise global fertiliser prices. The northern hemisphere would be the first to feel the effects of reduced Russian fertiliser exports, and subsequent tightened global balances, since their main consumption season occurs in the second quarter.
The situation will likely worsen with the EU sanctions on Russia, in particular its move to exclude Russian banks from the SWIFT digital monetary transfer system. The measure would effectively end commerce between the EU and Russia.
On top of that, since the outbreak of a hot war in Ukraine, wheat prices rose to the highest since 2008, reports Bloomberg. Ukraine is the world’s second-biggest grains shipper and Russia often tops the ranking for wheat exports. The two countries also account for approximately 80% of sunflower oil trade.
Even before the war in Ukraine, rising energy prices and the ripple effect of inflation had made farming much more expensive. Though consumers have noticed higher food prices at supermarkets, farmers have not seen proportionate compensation. According to farmers, what intermediaries pay them for the products eventually sold in grocery stores have not kept pace with increases in agricultural production costs.
Many European pork farmers are already losing money as pork prices in some countries are lower than the cost of raising pigs. Many dairy farmers, too, are in a similar situation. In Spain and France, for example, milk producers have held protests to demand fair prices from the intermediaries they sell to.
Additionally, parts of Spain and Portugal are suffering the worst drought in decades, a situation that particularly affects agriculture is causing anxiety among EU institutions. Europe’s farmers are seeing tough times that may get worse before they get better. In the coming weeks, EU institutions will be considering measures to help farmers suffering low prices and bad weather.