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Food and hit in the pocket: why renew the Black Sea Corridor

Date: March 22, 2023 Time: 12:36:23

There is a date that farmers and animal feed manufacturers have highlighted in red on their calendar: March 18, the date on which the so-called ‘Black Sea Grain Initiative’ expires. The agreement, sponsored by Turkey and the UN, which has created a maritime corridor so that Ukraine can export its cereal production with Russian acquiescence. In the stake Spain there is a lot at stake, because it is the second country that has benefited the most from this pact after China. According to estimates by the Ministry of Agriculture, until January 1 of this year, it had already imported 968,527 tons of Ukrainian grain. For example, it should be remembered that Ukraine was the second largest supplier of corn to Spain in the 2020/2021 campaign, only behind Brazil. A very necessary raw material for the manufacture of feed necessary for animal feeding and which, in a context in which the production costs of farmers are skyrocketing, can end up having an impact on the final price of products such as meat and milk.

Specifically, the ‘Balance of cereals in Spain’ prepared by the Ministry of Agriculture together with experts and market agents estimates the Spanish needs during the 2021/2022 campaign (from June to July) at around 38.8 million tons. Of all of them, some 28.51 million were used for the production of animal feed, while the necessary grain for human food is calculated at about 5 million tons. All this, compared to a local production that last year was more than 18 million but around 25% less than in 2021, according to estimates by Cooperativas Agroalimentarias.

Spain, “structurally deficient”

In the words of Jorge de Saja, general director of the Spanish Confederation of Compound Animal Feed Manufacturers (Cesfac), “the key is that Spain is structurally deficient. That is, we didn’t even get there in good years.” Or what is the same, if we want to feed our cows, lambs and other livestock we will have to import grain. “This has an advantage: we are used to searching, locating places to buy it and knowing how to use it by adapting the formulas,” says the representative of the feed manufacturers. This is what happened last year, during the first stages of the war in Ukraine, when Spain broke the relaxation of environmental requirements to import grain (soybeans, above all) from countries like Argentina in the throes of the lockdown bottleneck. from the Ukrainian barn.

“Short-term negative consequences”

So? In Cesfac, he believes that a hypothetical non-renewal would lead to a strong rise in prices in international markets and “negative consequences in the short term”, although for Saja the price increase would be “less” than last year or if this had occurred in January as the availability of other productions such as the Brazilian one is closer. In any case, sources from Agrifood Cooperatives have warned that “the Ukrainian harvest is going to be very short, because there is less surface area, less fertilizer and there has been no energy” due to the war.

For Ignacio López, director of International Relations of Asaja, the dependence of the livestock sector on cereals such as corn, it must be corrected through imports and he has warned that “any message immediately has an impact on the markets.” Coincidentally, the FAO released its cereal price index this Friday, which has normally remained unchanged since January. Even the reference to vegetable oil has decreased by 3.2%.

In any case, from Cesfac they take “for granted” the renewal of the Black Sea Corridor as of March 19 and provide a powerful reason: the stability of the Maghreb countries Nations like Egypt would like to avoid at all costs, he pointed out, the Fatal cocktail that originated the ‘Arab Spring’ in 2011: the combination of soaring commodity prices and the inability to feed a jaded population. Saja has even pointed out that a scenario of a certain moderation in cereal prices may take place this spring, although it depends on factors as variable as the rains in Europe and the evolution of the Ukrainian conflict.

Cost overruns and skyrocketing shopping cart

But what does all of the above have to do with the pocket of a Spanish consumer? An eventual closure of the Black Sea Corridor, starting next March 19, would further complicate the work of Spanish farmers whose production costs are already exorbitant. I mean, it rains it pours. The heads of the main agrarian organizations (Asaja, Coag, UPA and Agri-food Cooperatives) announced this Friday, in the Congress of Deputies, that many of the extra costs that they have been assuming could become structural.

Despite the fact that the focus is on energy and diesel, according to the ‘Index of Prices paid by farmers’, in November of last year the price of feed (simple and compound) had become more expensive by 28% compared to the same month of 2021. Which does not contribute to calming the price of fresh food (in February the core CPI, which does not include energy or processed foods, climbed to 7.7%). Only beef and poultry added in January, the most recent data recorded by the INE, year-on-year increases of 13.7% and 14.4%, respectively. So what happened in the Black Sea may end up having an impact on our pockets.

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

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