War in Ukraine puts pressure on European farmers

Jack Ronan’s farm is one of the 10 largest in Ireland. But with the war in Ukraine sending feed prices skyrocketing, he has begun to consider slaughtering his herd for the first time since his family started farming in County Tipperary three generations ago. .

The cost of feed, fertilizer and fuel has soared for farmers across Europe as Russia’s invasion of its neighbor cuts grain supplies and drives up the price of grain. energy and other inputs. Affected farmers are also finding it difficult to access credit as their financial problems worsen.

“I have never seen such a big outlay of money,” said Ronan, speaking at a “Save our Bacon” protest outside the Department of Agriculture in Dublin last week, where farmers demanded a €100m government loan to save the Irish pig sector, worth €1bn a year in exports, from ruin.

“We need a bridging loan,” he said. “The guy who supplies my food can’t afford to give me more credit. Which bank will finance my losses for the next 18 months?

Europe is one of the world’s leading agricultural producers and a net food exporter. The EU gets half of its maize from Ukraine and a third of its fertilizer from Russia, and war-driven rising energy prices have added to the pressure. Farmers said they could not immediately pass on these rapid cost increases to customers, causing cash flow problems.

“These are the four Fs: feed, fertilizer, fuel and finance. The war in Ukraine has had a huge ripple effect on farmers,” said Swithun Still, grain trader and adviser to DCX, an online agricultural trading platform.

An average farmer selling 300 pigs a week faces weekly losses of €18,000, Irish farmers have said.

Last month, Brussels rolled out a package of measures to support EU farmers, including temporarily relaxing state aid rules to allow governments to provide them with financial support.

The EU will also advance annual farm subsidy payments from December to October to help with cash flow and will help pig producers with the cost of carcass storage for up to five months, in anticipation of the market release of the meat when prices improve.

But a €500m crisis fund, which also allows member states to match their share of the funds up to 200%, must be approved by national governments and the European Parliament, a process likely to take several weeks. .

Fertilizers in a Russian factory
Russia is a major fertilizer exporter and Moscow’s invasion of Ukraine has driven prices up © Andrey Rudakov/Bloomberg

For European pig farmers, war erupted when demand from China, the world’s biggest consumer of pork, plummeted. European industry helped make up for the shortfall during the African swine fever outbreak in China in 2018, which decimated herds. But as China rebuilt its stock, European pork exports to the country more than halved in 2021 to $3.2 billion, compared to the previous year, according to International Trade Center data. .

“I am very worried about the pig sector,” said Josef Schmidhuber, deputy director for markets and trade at the Food and Agriculture Organization of the United Nations. “You see negative returns and supply destruction.”

Spain is Europe’s largest pork producer with 5 million tonnes a year, according to CaixaBank. Luis Planas, the country’s agriculture minister, said he was concerned about the “serious problem of animal feed”: around 22% of corn for cattle in Spain comes from Ukraine.

Alberto Pascual, who owns 30,000 pigs in six farms in the province of Avila in Castilla-León, said: “We had five, six complicated months with the high price of cereals and the low price of meat, then came the Ukraine invasion and even higher costs.

PJ Hegarty, sales manager for Irish animal feed company Southern Milling, said the cost of its own raw materials had “been beyond the Richter scale” since the start of the war. It was therefore difficult to finance the breeders. “We cannot afford to extend more credit because we have to pay for our raw materials within 10 days,” he said.

Line chart of CRU Fertilizer Price Index (January 2006 = 100) showing fertilizer prices are at an all-time high

Rising fertilizer prices, which hit record highs last month, are another concern for agricultural producers. Russia is one of the main exporters of nitrogen, phosphate and potassium fertilizers. Although prices for some crop nutrients fell last week, commodity consultancy CRU said high gas prices had affected the EU’s own production of nitrogen fertiliser, which is made in from fuel.

In Italy, farmers preparing for spring planting of corn, sunflowers, soybeans and tomatoes are experiencing a 40% drop in their fertilizer supplies compared to previous years, according to the agricultural association Consorzi Agrari d’Italia.

Spring is also a crucial time for fertilizing soft wheat and durum wheat, CAI said, adding that overall cultivation costs for growers of this crop have increased by 60% per hectare.

“There are fears that due to these very high costs, the productivity of wheat and other agricultural products will be lost,” said Gianluca Lelli, general manager of the association. The CAI urged its members to seek alternative solutions, such as the use of data and closer monitoring to enable more precise application of fertilizers in smaller quantities.

Fertilizer costs will also affect cattle farmers in Ireland, where most cattle are grass-fed, with any reduction in crop nutrients reducing hay and silage yields. ” Fertilizer. . . has tripled in price since last year,” said Maurice Brady, a cattle farmer in County Cavan.

In Germany, the agricultural association Deutscher Bauernverband called last week for the creation of a national fertilizer reserve similar to those for gas and LNG.

The headwinds facing farmers have many wondering if they can weather the storm. “Farmers have to make decisions today, but they can’t because they don’t know where they stand,” said Eddie Punch, general secretary of the Irish Cattle and Sheep Farmers’ Association. “The crisis is now.

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