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The arrival of Ukrainian grain in Spain raises fears of low prices… in the midst of a drought

Date: October 1, 2023 Time: 14:00:58

The coincidence of a strong entry of Ukrainian cereal by sea through the Black Sea corridor for this campaign and, above all, the lack of rain in recent weeks have subsided the alarm among the main agrarian organizations. From other links in the agri-food chain such as storekeepers (those who receive the grain from the farmer and sell it to the processing industry) and manufacturers of feed for animal feed (Spain is the largest producer in Europe) ask for prudence and remember that we are a deficit country that needs to import, among other things, to maintain sectors as relevant as beef and pork.

The director of international relations for Asaja, Ignacio López, acknowledged in a conversation with ‘La Información’ that Spain is a deficit country in everything related to cereal (35.85 million tons for domestic consumption, of which 18.1 million tons are produced in Spain, according to the Balance of Cereals in Spain for the 2022/2023 campaign of the Ministry of Agriculture) and that the value of this product “is surprisingly low despite a cost situation that has not fallen enough to justify it.” In this sense, he adds that “after the low production of 2022, this year there will be less” and warns against the consequences of the drought, although he admits that there are areas that can still mitigate the situation such as Castilla y León if it starts to rain. The Asaja representative points out that measures may be necessary for this sector to continue with its activity and mentions the first economic support package of 56.3 million euros from Europe to farmers in five Eastern countries.

López also draws attention to the lack of customs controls on the entry of Ukrainian grain and notes the paradox that all these imports were “theoretically going to supply other more dependent countries such as Sudan and Egypt.”

“Drought is a tragedy that, unfortunately, is a recurring reality,” says Jorge de Saja (Cesfac)

For his part, the general director of the Spanish Confederation of Compound Animal Feed Manufacturers (Cesfac) Jorge de Saja admits that “drought is a tragedy that unfortunately is a recurring reality” in reference to the lack of rainfall last year and He points out that “it is still too early” to make calculations, for which reason he calls for prudence. In this sense, he urges the implementation of better water management and explains that the animal feed industry is attentive to international markets. The person in charge of Cesfac does not see any catastrophe, although he does acknowledge “high concern” about the current situation. In any case, he does not see the production of feed for activities such as pigs and beef cattle at risk. Saja adds that “prices have dropped somewhat, but they have been above the average in recent years.”

The general secretary of the Spanish Grain and Oilseed Trade Association (ACCOE), José Manuel Álvarez, pronounced it along a similar line, warning that Spain is “extremely dependent on grain.” This does not prevent it from being the largest European feed producer for livestock feeding. The ACCOE representative makes a call “to take care of the value chain that surrounds our thriving livestock” and warns that the trend has been upward since the pandemic. In any case, he qualifies “Spanish cereal production is a drop of water in an ocean, it has no capacity to influence, although as an importer it can cause prices to rise.”

Specifically, according to data collected by ACCOE that this medium has accessed, white wheat went from 196.03 euros/tonne (0.19 euros/kg) in July 2019 to 212.56 euros/tonne ( 0.21 euros/kg) in January 2022 up to 334.46 euros per registered ton a year later. A similar situation has been recorded for corn, which in July 2019 was found at 188.46 euros/tonne (0.18 euros/kg), moving to 280.94 euros/tonne (0.28 euros/kg) in January 2022. up to 320.44 euros per ton (0.32 euros/kg) in the first month of this year, with a peak of 374.75 euros/ton in July 2022 at the highest peak in raw material prices. For its part, barley has gone from 181.74 euros/tonne in January 2020 to 317.94 euros/tonne (0.31 euros/kg) three years later with a maximum of 358.44 euros/tonne ( 0.35 euros per kg) in July last year.

Brussels pulls checkbook against criticism

In the last week up to five European countries (Poland, Slovakia, Bulgaria, Hungary and Romania) have publicly criticized the entry of Ukrainian cereal without quotas or customs controls (which will continue until this month of June) as it implies an imbalance for their internal markets . Even some of them like Poland, Hungary and Slovakia decided to suspend their importation, even in the case of the Hungarian government of the ultranationalist Viktor Orban, they extended the veto to other Ukrainian agricultural products such as eggs, honey and meat products. All this, together with the request for compensation from Brussels. In the end, the community authorities will decide to pull the checkbook and yesterday the European Commission concluded a second aid package for farmers in these countries for an amount of 100 million euros.

From Accoe, its general secretary José Manuel Álvarez, warns that as the lack of precipitation continues, “Brussels must try to articulate some type of policy so that no one loses” in reference to the continuity of the work of storekeepers and farmers. In his opinion, Spain could need “in about two months” some kind of support similar to what producers in these five Eastern European countries will now receive.

“Before the war, it was said that Ukrainian cereal could feed some 500 million people”, Javier Rivas (EAE Business School)

EAE Business School professor Javier Rivas, and the second of a purely political nature in reference to the electoral urgency of governments such as the Law and Justice Party (PiS) in Poland, which is holding its general elections next November. This party has one of its main supports in farmers and ranchers. “Also in the case of Hungary, the rural world gave part of its majority to Orban,” observes this expert.

For Rivas (EAE Business School) the bottom line is that the Black Sea corridor, promoted by the UN and Turkey, was intended to divert a large part of the grain to more dependent countries such as Egypt. Something that in his opinion has not occurred. “Before the war, it was said that Ukrainian cereal could feed some 500 million people,” summarizes this professor. Along these lines, he asks the European Union to “make self-criticism and analyze”.

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

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