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HomeLatest NewsCost overruns in logistics and diesel continue to rise in agri-food

Cost overruns in logistics and diesel continue to rise in agri-food

Date: March 23, 2023 Time: 00:39:01

The war in Ukraine, which is now celebrating its first anniversary, is keeping the agri-food sector in check, both in the primary segment and in mass consumption. Due to the increase in prices, after the conflict began at the gates of Europe, the sector continues to face additional costs due to interruptions in logistics and transport and fuel prices.

The agreement that Russia agreed to in the summer to reactivate the transport of grain from Ukraine has partly alleviated the shock caused by the start of the war, which paralyzed activity in the ports and logistics centers of the countries in contention.

The war has caused an inflationary spiral that has reached the price of agricultural fuel, the so-called B diesel, also used for fishing boats, and which has gone from costing less than about 1.1 euros this week.

The distortions in the logistics network and the increase in fuel prices have been transmitted to the entire food chain until reaching the final consumer and are among the causes of the price rise experienced by food, which currently persists, after a year of conflict

Extra costs in large consumption

41% of consumer goods companies have assumed a cost increase of between 10% and 20%.

This additional cost rises above 20% in 19% of the companies in the sector, according to a report published last October by the Association of Manufacturers and Distributors (Aecoc), but which is still in force today, Efe has told the Director of Logistics of this employer, María Tena.

The most important effects of the war have occurred along three axes: increase in energy costs (93.85% of associates), increase in the cost of raw materials (87.69%) and service problems with suppliers (70, 77%).

“What might seem like a one-off issue, or that could be resolved in months, has dragged on and companies are considering that if this continues like this they will have to take some action,” Tena said.

Cost overruns in the primary sector

The increase in the price of fuel is one of the consequences of the war that has affected the entire primary sector in a more transversal way, and for this reason the Government has decided to extend the aid of 20 euro cents per liter of diesel used by farmers , farmers and fishermen.

It is a subsidy that “helps” but that “does not cover all” the extra cost that the sector is assuming in this matter, the director of International Relations of the Asaja agrarian organization, Ignacio López, told Efe.

This rise in the price of diesel has meant that, for example, in the fruit and vegetable sector, the transport of production to the markets has become around 20% more expensive, the head of Labor Relations at the company explained to Efe. agrarian organization COAG, Andrés Góngora.

With regard to agricultural goods, the start of the war had a direct impact on Ukrainian and Russian ports, and this affected imports of cereals such as wheat and corn, of which Spain is deficient, as well as oil sunflower and fertilizers.

The progressive normalization of maritime transit led to 5,797,000 tons of trade by ship between Spain and Ukraine in 2022, barely 541,000 tons less than in 2021 to which Efe has had access.

In this scenario of moderate slowdown in the volume of merchandise traffic in Spanish ports due to the impact of the war, it is estimated that the turnover of port service companies closed 2022 with a figure of around 3,830 euros, million euros 5% more than in the previous year.

These are the data managed by the DBK Sectoral Observatory, dedicated to providing commercial and financial information, and which abounds in the fact that the impact of the conflict on the logistics and distribution chains prevented further growth, although by 2023 it expects a slowdown in activity.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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