Cost of living crisis: UK faces months of sharp food price hikes as Ukraine war hits supplies

Further pain for struggling families as sunflower oil, wheat, fertiliser and fish supplies hit, causing knock-on effects for a broad range of staple goods

Ben Chapman
Friday 25 March 2022 19:07 GMT
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Households face months of sharp increases in food prices and growing gaps on shelves as the war in Ukraine causes major disruption to supplies of key ingredients, industry leaders have warned.

Producers called on the government to urgently convene a national food security council to shore up supplies as a drastic drop-off in exports of wheat, sunflower oil, fish and fertiliser begins to wreak havoc along Europe's already stretched food supply chains.

The Food and Drink Federation (FDF) said that soaring prices will have knock-on effects on the cost of a broad range of staple goods. Wheat is used in feed for egg-laying hens, as well as pigs and dairy cattle, for example, while sunflower oil is found in processed foods from spreads to ready meals and crisps.

“The war in Ukraine is causing considerable supply chain disruption and ingredient shortages across the food and drink industry,” said the FDF’s head of international trade Dominic Goudie.

He called on the government to “mobilise the full arsenal of tools at our disposal” to protect households, including millions of vulnerable families, from further price rises and support companies through “an unprecedented period of turbulence”.

Official figures released this week showed food price inflation is gathering pace. Increases are expected to accelerate later this year, deepening a cost of living crisis that threatens to push 1.3 million people into absolute poverty.

Inflation jumped to 6.2 per cent in February and is forecast to surpass 8 per cent by the autumn, causing the worst drop in living standards since at least the 1950s. Rising food prices, catalysed by the war in Ukraine, will hit the poorest families hardest.

Russia and Ukraine account for more than 60 per cent of the world supply of sunflower oil and a third of wheat exports. While Russia has continued to ship some wheat, exports from Ukraine have all but halted since Vladimir Putin launched his assault four weeks ago.

Particular fears are mounting about supplies of vegetable oil from Ukraine, where farmers should now be planting this year's crop. Some farmers are deciding to sell their seed because they do not believe they will be able to harvest it, according to Kyle Holland, an analyst at Mintec, the leading provider of food-related commodity pricing and analytics.

Others are expected to replace sunflower – which is mostly exported for profit – with subsistence crops like oats, which are vital for surviving an increasingly bloody war which shows little sign of drawing to a quick conclusion.

That would mean higher prices and patchy supplies of some foods for consumers in Europe. Sunflower oil prices have more than doubled since the war began and Mintec estimates that Europe has just three weeks of supplies left.

Total global acreage of land planted with sunflower will halve this year, according to Mintec's estimates.

“This could cause the market to be inaccessible for a long period of time. The damage will take a long time to repair,” said Mr Holland.

High prices have pushed producers to buy other oils such as rapeseed but poor harvests have left supplies tight. Rapeseed prices are up 90 per cent in a year. This week the UK government relaxed rules to allow food producers to replace sunflower oil with alternatives without updating the packaging.

Meanwhile, exports of nitrogen fertilisers have also plummeted, causing prices to jump fivefold. The shortage threatens food production across Europe, potentially weakening the continent’s ability to make up for imports from Russia and Ukraine.

The UK’s fertiliser trade body accused the government of “downplaying” or misunderstanding the severity of the situation. “We’re desperately concerned about food security,” said Jo Gilbertson, head of fertilisers at the Agricultural Industries Confederation (AIC). The AIC has requested a meeting with environment secretary George Eustice, but he has not yet granted one.

Mr Gilbertson warned the situation may worsen as governments seek to impose further sanctions on Russia.

Global wheat stocks are at their lowest level since 2006 and prices have surged 62 per cent since January. While the UK doesn't import much wheat directly from Ukraine or Russia, any reduction in the global supply has an impact here.

Those supplies were already under strain from weak harvests in the US. In an unusual move, China also stated publicly that it has had a very bad wheat crop this year.

Beijing has been under scrutiny for building up vast stocks of grain while other countries, particularly in the Middle East and Africa, struggle to import enough to feed their citizens.

Milk supplies are also under pressure. On Friday, the UK’s largest dairy, Arla Foods, warned that costs are increasing at record rates, leaving farmers struggling to cover expenses. Arla is calling for higher pay for farmers to ensure they can keep the milk flowing.

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