UK farmers face ‘existential crisis’ as Ukraine invasion hits grain, energy and fertilizer supplies Business News

British farmers face an ‘existential crisis’ that will drive up food prices, experts have warned, as Russia’s invasion of Ukraine disrupts grain supplies and drives up energy costs and fertilizers at record levels.

European gas prices briefly hit 800p per therm on Monday, nearly 20 times the level seen a year ago, as traders dealt with news of growing threats to Russian gas supplies which are essential to keep the lights on across Europe and power heavy industries such as nitrogen fertilizer production.

As Vladimir Putin intensified Russia’s bombardment of Ukrainian cities, energy markets weighed the prospect of a protracted conflict in a region so vital to the world’s wheat supply that it is known as “the bread basket”. wheat of Europe”.

Western leaders have increased the threat of sanctions against Russian oil imports and, although the gas is still considered prohibited, the risk of an embargo is now real. On Monday, Moscow warned of “catastrophic consequences” if Russia were cut off from world markets.

Futures prices – which give an idea of ​​where traders and buyers will head – indicate that energy costs will remain high for at least the next two winters. Farming industry leaders have warned it is almost certain to have a major impact on the ability of UK farmers to meet the country’s food needs.

Skyrocketing gas prices mean nitrogen fertilizers – a crucial input for securing crop yields – now cost at least four or five times more than they did a year ago, said Jo Gilbertson, fertilizer manager at the Confederation of agricultural industries.

He added that energy prices are so volatile that farmers are now struggling to get a firm quote on the price. Infofert, a company that analyzes the industry, reported that retailers were “desperate to buy” wheat and corn, fearing that “within hours” energy and fertilizer prices would have moved against them, driving up the cost of grain.

“Farmers are hesitant to buy fertilizer because they don’t know if they will be able to recoup their costs,” Gilbertson said. When carrots sell for 45 pence a kilo at Lidl, does that cover a fivefold increase in fertiliser? What is the cost of a potato if the fertilizer costs five times what it cost? »

It’s not just nitrogen that’s at risk. Russia is among the top five exporters of the five main types of fertilizers, including urea, ammonium nitrate and phosphates. Some of them, such as phosphates, are difficult to obtain elsewhere at the same level of quality.

Gilbertson predicts an upward spiral in food prices as farmers are forced to cut production or buy fertilizer at record prices. Imports from the EU are unlikely to ease the pain, he said.

“Everyone in Europe is in the same boat, so where we would have traditionally gotten our fruit and vegetables from Spain, they face exactly the same cost pressures.”

The problems are compounded by the fact that some British farms depend on Ukrainian workers, said Minette Batters, president of the National Farmers Union.

Many farmers have delayed buying fertilizer, hoping in vain that prices will drop. Panic set in last week when Russia launched a full-scale invasion, prompting European farmers to rush to buy limited stocks, further driving up prices.

Meanwhile, imports are being disrupted as suppliers fear tougher sanctions on Russian products. According to Infofert, there are already reports that fertilizers produced or controlled by Russia are being sold below market levels in Europe to make money.

Although there is no official embargo on Russian fertilizers, a de facto the ban is growing because buyers won’t visit Russian ports, insurance companies won’t cover ships from the region, and banks are unwilling to handle financing or payments. The Kremlin also advised producers to stop exporting.

This means UK dairy farmers and ranchers will face a “double whammy”, Gilbertson said, as they cannot afford enough fertilizer to grow grass for their herds and they face huge increases in the cost of grain-based alternative foods. .

They are usually unable to stock up on fertilizer in the winter because their herds are kept indoors which uses up storage space. As a result, they will have to endure record market prices or reduce their herds, which means less British meat.

“Something has to give,” Gilbertson said. “We are on a road where we do not see where we are going but we know that it will not be pleasant.”