The war in Ukraine is straining an already stressed global supply chain and increasing volatility in commodity markets. Rupert Claxton from Gira, a global strategic market consultancy and forecasting for the food and drink sector, says the price increases in fertilizer and oil has caused an increase in feed costs for producers, which leads to higher food costs for global consumers.
“And right across the basket of goods that they’re buying. And what that means is as we as we look into what they can afford, they’re going to be able to afford less meat globally. So, we’ve got this pinch between higher costs for the industry producing meat right across the board, whether that’s labor or whether it’s feed, faced with a consumer that can afford less.”
Both Russia and Ukraine are massive producers and exporters of oilseeds and grain, specifically wheat. Prices were already increasing prior to the invasion due to weather events, supply chain disruptions and input costs, but the trade limitations and tapering production add additional challenges. If producers in the U.S. have their current feed contracts taken care of, Claxton says it’s the long-term strategy that is concerning.
“Though we’re sheltered instantly within the U.S. market, we know that those cost increases are going to come and you’re going to have to find ways pass those on to the buyer. So, they’ve got to go on down the chain, and that’s a challenge for the market today, is to understand that you need to pass the cost on and the industry needs to find ways to continue to move pork into market, not just the U.S. market but also out onto those export markets.”
Even as higher costs have taken center stage, Claxton said the world is still talking about sustainability. “We got to remember that that discussion on sustainability isn’t shelved, it hasn’t been washed away, by this current crisis, the war in Ukraine. So, we’re going to come back those topics, we have to prepare an align ourselves for where we’re going on those issues as well. So, yes, we’ve got a major problem on our hands, but work on the long-term issues at the same time.”
Last week, National Pork Board hosted a Checkoff-funded webinar titled The Ukraine-Russia War and the Meat Livestock Value Chain where Claxton expanded on these topics. A webinar recording is available at porkcheckoff.org.