Economy of TODAY
The war in Ukraine and all that it entails – from grain imports to fertilizer imports – will have a direct impact on the pockets of Extremadurans
It is still early to know what will happen in the coming months, but the war in Ukraine is already affecting the domestic economy of Extremadurans. The so-called “breadbasket of Europe” will not export cereals such as wheat and corn and the lack of sunflower oil on supermarket shelves is more than evident. The increase in the cost of energy or fertilizers only aggravates the situation among producers, and this circle of increases definitively affects the consumer.
The Consumer Price Index, the CPI, was not so high (8.1%) in Extremadura since 1986. And what remains to rise after the foreseeable continuity of the conflict. In addition, the aforementioned lack of cereals -according to the Institute of Foreign Trade (ICEX), 42% of the cereal that Spain imports comes from Ukraine (2020)- above all affects farmers, who were already in trouble due to the increase prices of energy inputs.
That is, any consumer can verify that everything derived from these raw materials has risen and will continue to rise: bread and everything related to this product, such as pastries and flour; compound feed and beers will be the most striking. Meat and sausages, eggs and milk, too.
And, of course, sunflower oil -according to Asaja, 60% of what is bought in Spain comes from Ukraine-, which, as the Minister of Agriculture, Fisheries and Food, Luis Planas, has recognized, is an “element of vulnerability » along with corn, of which 30% is imported from the invaded country. In fact, the canneries and the sweet industry are already warning of the lack of stock of a product that is essential for them. “Advances are being made in contacts to bring raw materials from Argentina and the United States, among other markets,” said Planas, who has also defended “the quality of olive oil” as a possible substitute.
A real rise or just price speculation?
Why such a rise in prices if Ukraine’s import quota has already reached Extremadura? That is what Ignacio Huertas, general secretary of the agrarian organization UPA-UCE Extremadura, asks himself, who sees how the ranchers, he says, “continue to sell the calves the same and that they have doubled the inputs.” And he points out: “In this rise in food prices there is widespread speculation.”
«We see that the prices of all products rise above what is the reality that affects us. Why is the price of grain skyrocketing, if the import quota from Ukraine has already reached us? In any case, we must point out that this war has generated a problem for us with gas, fertilizers, phytosanitary products -which have skyrocketed, like fuel-, or electricity for irrigation… This rise in costs affects us and also affects the final consumer”.
According to him, the Government should intervene to find out what is happening in the chain and who is taking advantage of this rise in prices – “not us, of course,” he stresses – and points out the importance of having food sovereignty: “The Commission Europe should seriously rethink whether we have to depend on outside for food, for basic necessities. After all, we have to eat every day.
The data in Extremadura
Juan Francisco Caro, a data analyst, reveals that the global figures for imports from Russia and Ukraine to Extremadura are rather small. And it is that the incidence that the war will have in the region “will not come so much from its direct foreign trade, but indirectly.” For example, with respect to Russia, it can be seen that there are some years with higher figures that are almost exclusively due to the entry of iron and steel.
The important thing, and which also affects Extremadura, are national imports. If a “normal” year is taken, that is, prior to the pandemic, such as 2019, it can be seen that the most important from Ukraine are, indeed, cereals, 25% of the total imported into Spain. “It will be hard,” admits Caro. What will affect Extremadura the most will be cereals and fertilizers and, therefore, it will harm farmers and ranchers, who already had several problems on top of them.
Within cereals, “fundamentally corn (665 million), but also wheat (108 million) and barley (56.5 million). As for fats, everything is sunflower oil (11% of what is imported). And from the salt and plaster section, what is imported is kaolin, a material that is used both for agrochemical treatments and for construction », he explains. On the other hand, there are important items of iron ore and manufactured iron or steel and also vegetables, where what is imported are peas.
Likewise, from Russia, the main items are fuels (gas and, above all, oil), and fertilizers (7.7%) and metals (iron and steel, nickel, aluminium, tin…).
An economic recovery that “slows down”
The economic vice president, Nadia Calviño, admitted last Thursday that “the war can slow down the economic recovery but it does not put it at risk.” The Government pointed to a growth of 7% in 2022 -after a drop of 10.8 in the first year of the pandemic-. But that forecast was presented last September, before the arrival of omicron, the war in Ukraine and the rise in energy prices.
Both she and Planas have been denying for days that there is a shortage problem. “It is not a situation, far from it, one of the most serious,” the minister pointed out at a Europa Press event. We have a very high level of food supply and it is a source of pride. We have a level of food autonomy that allows me to say that there is no shortage problem, despite the images that are coming out of hoarding products, which makes no sense.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.