The Chief Executive of the 2 Sisters Food Group has warned that the crisis in Ukraine could pose a major threat to UK food security and result in inflation in the sector hitting 15% by mid-year.
A statement issued by Ronald Kers said: “The events in Ukraine are an unimaginable tragedy and our hearts go out to those affected and to our Ukrainian colleagues and supply chain partners and their friends and relatives back home. It is an incredibly worrying time and we will do all we can to support them.”
He added: “This conflict brings a major threat to food security in the UK and there is no doubt the outcome of this is that consumers will suffer as a result. War disrupts the free flow of trade and the impacts for us are severe. For example, the input costs of producing chicken – with feed being the biggest component – have rocketed. Prices from the farm gate have already risen by almost 50% in a year.
“Before this war began, 4 to 5% food inflation was being forecast by mid-2022. But we now could see a hyper-inflationary environment at closer to 10 to 15% – more than it’s been for 50 years – if this conflict isn’t resolved quickly.”
With Russia and Ukraine major producers of grain and fertiliser, food producers in the UK are facing surging production costs. CO2, which is used in packaging and the slaughter of livestock, has also been impacted by the jump in gas prices.
Kers noted that 2 Sisters Food is heavily dependent on a stable agricultural sector, with commodities such as animal feed and CO2 vital to its operations.
“Our chicken doesn’t arrive on dinner tables without farmers,” he said. “In fact, with no agriculture, there’s no business for us. Our concern is that a lot of people haven’t realised the food production clock is ticking. Ukrainian farmers should be sowing crops in March, instead they’re fighting for their country. If this war is not stopped now, the UK could experience a major drop in supply of products like wheat, barley, corn, rapeseed, and sunflower oil. So a European supply chain issue escalates to become a global commodity price crisis, and none of us can escape this.”
Kers highlighted that these pressures added to the inflationary environment that had already been building in recent months. “This is why we need cross-territorial collaboration food security strategies to bring some order amongst the chaos,” he said.
“The reality is companies like 2 Sisters trade globally, and the smooth flow of trade links between states are vital. Without measures to isolate states from food security risks, ultimately there will be less food and higher prices to pay, with the poorest in society hit hardest.”
NAM Implications:
- “Prices from the farm gate have already risen by almost 50% in a year”
- This says most of it but not all…
- With Russia Ukraine now replacing Covid in terms of consumer fears and uncertainty…
- …there will be challenging consequences:
- Depressed demand simultaneous with shortages
- In a ‘hyper-inflationary environment
- Key that you put some what-if numbers for your categories…
- …and prepare where possible.
