Portugal is currently facing a very difficult situation due to the extended drought and the war in Ukraine, both of which have led to an astounding increase in the prices of energy and fuels.
This has caused an uncontrolled increase in the cost of essential raw materials for the food supply chain. Among the sector’s industrialists, farmers, producers of meat, bread, milk and eggs, despair has reached the point of considering a rationing, since the animals destined for human consumption only have feed available until April. The war could lead to a food emergency within the European Union as the price of food rose by 30%.
In order to understand what can happen with the European food chain, we sat down with Luís Mira, the Secretary General of the Portuguese Farmers Confederation (CAP)
In the EU there is no production issue, the problem is the surge pricing.Luís Mira, Secretary General of CAP
1. Countries that once had other suppliers contribute to the increase of prices
Much has been said about the food crisis and an eventual shortage of cereals, especially wheat, in Europe, although Luís Mira says “80% of the wheat imported to Portugal is sourced in France, for which it won’t be affected, and there will be supplies. The problem is the surge in prices related to the fact that other countries, which had other suppliers, will start to buy from the same countries as we do, making prices go up.”
Portugal’s Minister of Agriculture has recently announced that the European Commission came forward with 500 million euros to distribute by the EU Member States to guarantee the securing of food supplies, allocating 9 million euros to Portugal, which Mira considers as a “very little amount” and adds that, contrary to what has recently been mentioned, “it is the acquisition of corn and not that of wheat that will give us more problems, as 40% came from Ukraine, but even so there is no risk of the supply being cut off.”
There will therefore be no lack of cereals, but the UN has warned that it could happen in other countries. The Secretary General of the United Nations, António Guterres, has said that the world may face a “hurricane of famine” and the International Monetary Fund (IMF) has alerted that the war in Ukraine could cause a worldwide food crisis without precedent.
During the pandemic, a global and sharp rise in the prices of food could be noticed. A larger pressure has now been growing in the global market due to the scourge of war in Ukraine. It is expected that the volatility is prolonged for months, which could create disruption in the supply chains. The United Nations’ Food and Agriculture Organization has already claimed that governments “should be working to extend their social aid”. Despite this, the scenery in Portugal is still one of hope, with some solutions in sight.
2. Solutions: “Measures such as the government abdicating from fuel and electricity taxes could make a difference”
At a meeting that occurred last Tuesday with Portugal’s Secretary of State of Agriculture, Consumer rights and Employment, concerning the matters on food, Luís Mira tells us: “We have spoken about how the European Commission should step forward with bulk acquisitions to the member states, negotiating with each of them the amount they will need and thus allowing a smaller price to the consumer for the acquisition of food items. The Commission has all the legal means to do it”.
CAP has also suggested that the Portuguese government “abdicates part of the taxes concerning fuel and electricity. This is what could make a difference instead of the credit lines that plunge farmers deeper into debt,” Mira emphasizes.
The major problem at this moment is not really the lack of products, but the rising prices, and the Commission can contribute to the diminution of this increase. Therefore, the other solution is the strategy for the stock management for which the Commission must take initiative.Luís Mira, Secretary General of CAP
3. “Silo blocks in the north and south of Portugal could be strategic: Investment would be of about 10 million euros”
To understand how a leading company of the market of cereal milling currently lives, we have also spoken with Luís Ramos, administrator of Germen, a Portuguese Association of the Milling Industry and a leader in cereal milling, processing of wheat, barley and rice into flours for the baking, cracker, culinary and child nutrition industries.
Ramos reassures people by saying that “for now the crisis is under control and we have provisions for 2 or 3 months, since the supply chain continues working, considering the fact that material is not facing shortages, however it is necessary to regulate the supply”.
He further reflects on this, saying that “if we consider the possibility of an interruption of maritime traffic, it would be important if Portugal would guarantee some autonomy and keep its stock, a strategic reserve of at least a month or two of products in silos from north to south of the country, so that it would not depend on the ships”.
Luís Ramos then suggests something that could be part of the solution. “Portugal Portugal producing 15 to 20% of its own supply and promoting the construction of two silo blocks, one in the north and the other in the south, which could be strategic for the time being for some self-sufficiency; the investment would be of around 10 million euros”.
North Africa and Asia could search for supplies among our usual sources and because of that we could even see prices affected by this, also because sea freight doubled the cost, as well as energy. Fortunately, however, we possess supplies of cereals up to and including May.Luís Ramos, President of the Portuguese Association of the Milling Industry
In conclusion, the global alert is that, with the fear of scarcity, countries are already turning to themselves, which could lead to the lack of some food items for those who will need them most.
Indonesia, for example, has restricted the palm oil exports while being its largest producer in the world. Egypt has just forbidden the exports of flour, wheat, lentils and beans due to the rising concerns with the food stocks.
Ministers of the G7 have therefore asked the countries to “keep their food and agricultural markets open and to protect themselves from any unjustified restrictive measures to their exports, seeing that at this moment, any volatility in the international market could threaten the food security and nutrition at a global scale”.