After a turbulent few years navigating the post-Brexit climate, the Covid-19 pandemic and confusing government policies, the British farming industry may now be facing new challenges as the effects of Russia’s invasion of Ukraine ripples throughout Europe.
Following Russia’s decision to lead a full-scale war in Ukraine on Thursday, the cost of imports is set to skyrocket with already soaring fertiliser costs predicted to jump up by another 40%, with some grain prices doubling.
Russia is the fifth largest trade partner with the EU and one of the world’s largest oil and gas producers, currently supplying Europe with almost half its gas usage. While the UK only imports around 5% of its gas needs from Russia, it relies on pipelines that run through Belarus, Poland, Ukraine, and Germany. The wholesale price of energy jumped 33% on Wednesday to 285p per therm. It is an increase of 65% since Monday.
As the crisis in Ukraine escalates and western nations vow to impose stricter sanctions on Russia, there are growing fears over supply disruptions as Russian energy exports such as oil and natural gas could be excluded from global markets.
For farmers, the market price of natural gas could have a knock-on effect on fertiliser prices, as it’s one of the main raw materials for manufacturing nitrogen fertilisers. The cost increase could be so much so that some farmers may struggle to afford to buy fertiliser in the quantity they need.
This comes at a time when fertiliser prices are already at an all time high, with Europe and Asia feeling the impact of a declining natural gas supply, causing prices for some nitrogen fertilisers to rise three-fold in the 12 months.
The Russian attack on Ukraine could also spell disaster for the grain markets, having a catastrophic impact on British farmers buying animal feed. The assault on Thursday forced Ukraine to shut its commercial shipping port, affecting the country’s major grain exports. Ukraine is estimated to contribute 12% of the global wheat exports, and together the two countries account for 29% of global wheat production.
The combination of war and sanctions means that later this year, the price of wheat could double, and the price of maize could rise by 30% (reported by Rabobank).
This negative chain reaction will be felt deeply by consumers who will ultimately pay the price of the rising costs, as grocery prices continue to increase. Sarah Coles from Hargreaves Lansdown said: “Food prices are already rising at their fastest pace in a decade, and the price of essentials like pasta, milk and eggs is rising even more quickly”.
