DECRYPTION – The conflict in Ukraine is destroying world markets for grain, oil and gas. What are the implications for the French diet?
While the war in Ukraine has been going on for more than two weeks now, several thousand kilometers from our borders, this conflict could affect the price of many consumer goods purchased by the French.
Ukraine and southwestern Russia are indeed among the world’s leading grain producers. These two countries account for a third of global soft wheat exports. As a result, US wheat prices reached a new record on Tuesday, still fueled by uncertainty over supplies from Russia and Ukraine. The price of soft red winter wheat (SRW) for May delivery jumped to $13.6350 per bushel (about 27 kg), well above the previous high of $13.4000 set on Friday.
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Russia is also the leading supplier of natural gas to Europe, accounting for 40% of its total imports and 20% for France. Even if gas prices fell on Tuesday, facing a reduced risk of a European embargo on Russia, the price of gas still rose 147% year-to-date.
For its part, diesel prices jumped 14 cents over the week, according to official data released on Monday. “In 2020, France imported 25 million tons of diesel fuel, a quarter of which is Russian diesel fuel, about 6 million tons. Here again we have a potential dependency and the market is already in the process of reorganization and, in particular, moving away from Russian diesel fuel, hence the significant growth that we saw in diesel fuel last week,” said Olivier Gantois, President of Ufip (former French Union of Petroleum Industries).
Fluctuations in the prices of cereals, gas and oil, which can have a direct impact on breeders and manufacturers and, ultimately, on the price offered to consumers. “Even before the start of the conflict, we predicted inflation at an average level of 3% for all consumer prices, in particular, due to the increase in the cost of transport, gas and electricity, as well as raw materials due to the vagaries of the weather. The additional impact of this war on prices will depend on its severity and duration, but inflation is expected to be around 5%,” explains Iri’s Emily Mayer. Some products are expected to be affected more than others.
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livestock sector
In addition to their importance in the wheat market, Ukraine and Russia represent 20% of global corn exports, according to FranceAgriMer. It is one of the main cereals used along with wheat for feeding chickens and pork. “It will be more expensive for breeders to feed them, which will affect their selling price,” emphasizes Emily Mayer, director of Business Insight (commercial perspectives) at Iri, an institute specializing in consumer product data analysis. As for beef, this should also affect the price, but less. Indeed, cows eat mainly grass and only small amounts of cereals.
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However, this price increase should not be felt immediately. “Breeders already have stocks of grain for the next two to three months. It is when they have to buy it back that the impact will be felt. Prices for all peripheral products such as eggs and cold cuts will also be affected,” says Henri Bies Pere, vice president of the National Federation of Farmers’ Unions (Fnsea).
Dairy products
Grass is the main forage for cows, but cereals such as wheat and barley are still used as a supplement to their diet. Ukraine and Russia account for 30% of world barley exports. “It follows that the price of milk will also rise, but not as much as for animal products, because the weight of cereals in the diet of cows is lower,” explains Henri Bies Pere from FNSEA. As a result, all dairy products such as cheeses, yoghurts and cream will also rise in price.
Flour and products containing it
Since flour is obtained by grinding grains of cereals, usually soft wheat, it will be directly affected by rising wheat prices. “Thus, all products containing flour will be affected indirectly, depending on the proportion of raw materials in the finished product. It is found in most cookies and baked goods,” says Iri’s Emily Mayer. As for bread, Christian Lambert, president of the FNSEA, wants to reassure that there will be no consequences, because “for bread we use French wheat.”
butter
“Russia and Ukraine account for 78% of world exports of sunflower oil,” emphasizes Emily Mayer. which indicates that a double-digit inflation rate should be considered for that particular product. Ukraine is the largest producer of sunflower oil in the world. This is a significant increase in prices, which can also have a ripple effect on the prices of other types of oil, which, therefore, will be in high demand. According to the IRI, today sunflower oil accounts for 37% of oil sales in France.
Some alcohols
Barley is one of the grains most commonly used to make beer and whiskey, and with Russia and Ukraine producing 30% of global exports, “this could affect the price of these two spirits,” says Iri’s Emily Mayer.
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