HOW FOOD PRICES
ARE BEING AFFECTED BY
THE CONFLICT IN UKRAINE
HOW FOOD PRICES ARE BEING AFFECTED BY THE CONFLICT IN UKRAINE
WE HAVE BEEN FOLLOWING THE NEWS ON RUSSIA’S WAR IN UKRAINE CLOSELY.
As a fully-integrated consumer goods value chain advisory and solutions business – that operates across multiple entities and geographies – we have been looking at how the situation has been and will affect food prices.
CURRENT CONCERNS
Ukrainian ports in the Black Sea are currently blocked, meaning there are no products leaving or
entering Ukraine via sea. While there are ships at the ports, they are unable to move or
load/unload goods which has led to a complete halt of export activities out of the region.
At the same time, transportation and movement of goods across land have also been hindered
as any vehicle that is not a passenger car is prohibited from travelling.
WHAT YOU SHOULD KNOW
Russia and Ukraine are vital producers and exporters of global agricultural products and
therefore demand that every agricultural role-player keeps an eye on the developments in the
Black Sea region.
In the near term, we will likely experience the impact of the war through global price channels.
For farmers, this could be beneficial as prices would temporarily see upside pressure. For the
consumer, however, this could have detrimental effects on food commodity prices.
WHAT MINTEC HAS TO SAY
Source: Minetec Analytics, CME, Euronext
KEY TAKEAWAYS
How the 2022 Ukrainian Harvest will Be Impacted
Source: How will the Russia-Ukraine conflict impact the 2022 Ukrainian harvest? www.mintecglobal.com
POTENTIAL IMPACT ON WORLD PRICING
In the near term, the largest impact – both from crops currently in the ground and crops to be
planted from April – will be felt on grains and oilseeds. Secondary impacts can be expected on
feed and livestock value chains in the medium term.
HOW SOUTH AFRICA COULD BE AFFECTED
Proteins and dairy are expected to be affected due to the impact of grains and oilseeds on the
animal feed value chain. Another indirect consequence will be on the cost of certain fertilisers.
South Africa imports the majority of the fertilisers used in its agriculture industry and Russia and
Ukraine are key source markets for the base components of fertilisers.
Proteins and dairy are expected to be affected due to the impact of grains and oilseeds on the animal feed value chain. Another indirect consequence will be on the cost of certain fertilisers. South Africa imports the majority of the fertilisers used in its agriculture industry and Russia and Ukraine are key source markets for the base components of fertilisers.
The near-term expected impact, in terms of availability, largely centres on grains, specifically
wheat. South Africa imports between 40 – 50% of its wheat requirements and the large wheat
millers depend on these supplies to cover wheat requirements throughout the year.
The second impact after availability, of course, is and will be price. The South African wheat
price is derived from the global wheat pricing (see Global grain prices graph above), with maize
also linked to global price levels – even with South Africa being self-sufficient in maize.
Source: International Trade Centre (ITC)
THE EFFECT OF THESE IMPACTS WILL HAVE A MULTISEASONAL LAG AS IT ROLLS
THROUGH THE VALUE CHAIN FROM FARM INPUTS TO PRODUCED COMMODITIES.
THE INITIAL UPWARD TREND CAN BE SEEN IN THE GRAPH BELOW.
THE EFFECT OF THESE IMPACTS WILL HAVE A MULTISEASONAL LAG AS IT ROLLS THROUGH THE VALUE CHAIN FROM FARM INPUTS TO PRODUCED COMMODITIES. THE INITIAL UPWARD TREND CAN BE SEEN IN THE GRAPH BELOW.
Source: FAO and Agbiz Research
WHAT CAN BE DONE?
To manage consumer price increases proactively, it is key to understand where these
commodities will impact the value chain and which products will be affected. This is where value
chain data analytics can and should play a vital role, affording you the agility to adapt in line
with consumers’ response to prices before they trade down.
OUR APPROACH
VALUE CHAIN SOLUTIONS HAS A ROBUST, END-TO-END METHODOLOGY AND
TOOLSET THAT CAN NOT ONLY ASSIST BUT ACCELERATE THE MAPPING AND
ADJUSTMENTS TO ENSURE VALUE IS STILL DELIVERED ACROSS VALUE CHAINS.
Our Virtuous Cycle can help you understand what the availability and costs of raw materials
mean for your value chain and how pricing is influenced. Understanding cost drivers and risks,
by using data and insights, will help you determine where the value chain will be impacted.
Being agile and in the know will allow you to realign your value chain to critical components,
that is, pricing, cost savings, waste reduction and consumer responses to market changes.
VIRTUOUS CYCLE
BE PROACTIVE | BE AGILE | BE READY WITH VCS
BE PROACTIVE
BE AGILE
BE READY WITH VCS
