Ukraine war piles pressure on Europe’s farmers

Jack Ronan’s farm is one of the 10 largest in Ireland. But with war in Ukraine ratcheting up feed prices, he has started to consider culling his herd for the first time since his family began farming in County Tipperary three generations ago.

The cost of animal feed, fertiliser and fuel has soared for farmers across Europe as Russia’s invasion of its neighbour squeezes grain supplies and sends the price of energy and other inputs rocketing. Stricken farmers are also having difficulties accessing credit as their financial problems mount.

“I’ve never seen as big a cash burn, ever,” said Ronan, speaking at a “Save our Bacon” protest outside the agriculture ministry in Dublin last week, where farmers were calling for a €100mn government loan package to save the Irish pig sector, worth €1bn a year in exports, from ruin.

“We need a bridging loan,” he said. “The guy who supplies my feed can’t afford to give me more credit. What bank is going to finance my losses for the next 18 months?”

Europe is one of the world’s leading agricultural producers and is a net food exporter. The EU obtains half its corn from Ukraine and a third of its fertiliser from Russia, and rising energy prices driven by the war have added to the strain. Farmers said they cannot immediately pass on such rapid cost increases to customers, leading to cash flow problems.

“It’s the four F’s — feed, fertiliser, fuel and financing. The war in Ukraine has had a huge knock-on effect for farmers,” said Swithun Still, a grain trader and adviser to DCX, an online agricultural commodity trading platform. An average farmer selling 300 pigs a week faces weekly losses of €18,000, said farmers in Ireland. Brussels last month put together a package of measures to support EU farmers including temporarily easing state aid rules to allow governments to give them financial support. The EU will also bring forward annual agricultural subsidy payments from December to October to help with cash flow and will assist pig producers with the cost of storing carcasses for up to five months, in anticipation of meat being released to the market when prices have improved. But a €500mn crisis fund, which also allows member states to match their share of the funds by up to 200 per cent, needs approval by national governments and the European parliament, a process likely to take several weeks.

For Europe’s pig farmers, the war broke out as demand fell from China, the world’s largest pork consumer. The European industry helped make up the shortfall during China’s African swine fever outbreak in 2018, which decimated herds. But as China rebuilt its stock, Europe’s pork exports to the country more than halved in 2021 to $3.2bn, compared with a year earlier, according to International Trade Centre data. “I’m very worried about the hog sector,” said Josef Schmidhuber, deputy director of markets and trade at the UN Food and Agriculture Organization. “You are seeing negative returns and supply destruction.” Spain is Europe’s largest pork producer at an annual 5mn tonnes a year, according to CaixaBank. Luis Planas, the country’s agriculture minister, has expressed concern about the “serious problem with animal feed”: about 22 per cent of the corn fed to livestock in Spain comes from Ukraine. Alberto Pascual, who has 30,000 pigs spread across six farms in the Castile-León province of Avila, said: “We’ve had five, six complicated months with the high price of cereal and the low price of meat, and then came the Ukrainian invasion and still higher costs.” PJ Hegarty, sales manager at Irish feed company Southern Milling, said the cost of its own raw materials had “gone off the Richter scale” since the start of the war. This made it difficult to bankroll livestock farmers. “We can’t afford to give more credit because we have to pay for our raw materials within 10 days,” he said.

Increasing fertiliser prices, which rose to record levels last month, are another worry for crop growers. Russia is a leading exporter of nitrogen, phosphate and potash fertilisers. Although prices for some crop nutrients eased last week, commodity consultancy CRU said high gas prices had affected the EU ‘s own production of nitrogen fertiliser, which is made from the fuel. In Italy, farmers preparing for spring sowing of corn, sunflowers, soya and tomatoes are experiencing a 40 per cent decline in fertiliser supplies compared with previous years, according to farming association Consorzi Agrari d’Italia. Spring is also a crucial period for fertilising soft wheat and durum wheat, said CAI, adding that overall cultivation costs for growers of the crop had risen as much as 60 per cent a hectare. “There is a fear that, due to these very high costs, the productivity of wheat and other agricultural products may be lost,” said Gianluca Lelli, the association’s chief executive. The CAI has urged its members to look at alternative solutions, such as using data and closer monitoring to allow more precise application of fertilisers in lower quantities.

Fertiliser costs will also affect beef farmers in Ireland, where most cattle are grass-fed, with any cut in crop nutrients reducing hay and silage yields. “Fertiliser . . . has tripled in price since last year,” said Maurice Brady, a beef farmer in County Cavan. In Germany, farm association Deutscher Bauernverband last week called for the creation of a national reserve of fertiliser akin to those for gas and LNG. The headwinds facing farmers have left many wondering if they can weather the storm. “Farmers need to make decisions today but they can’t because they don’t know where they stand ,” said Eddie Punch, general secretary of the Irish Cattle and Sheep Farmers’ Association. “The crisis is now.”

The Financial Times

Tags: Europe, Feed, Fertiliser, costs, pig, Ukraine, Russia, China, prices