International

Russian invasion of Ukraine, a game-changer in the global meat trade

Food prices are expected to increase in both Ukraine and Russia, as the war is reshaping the course of industries.

Posted on Feb 24 ,13:23

Russian invasion of Ukraine, a game-changer in the global meat trade

The Russian invasion of Ukraine is expected to trigger a spike in commodity prices around the world. Markets have been on edge for weeks and a conflict – or sanctions – could drive energy and food prices even higher, and push Europe into a major supply crisis. “Rising geopolitical tensions are further amplifying the case for commodities, given Russia’s far-reaching impact on global commodity markets,” JPMorgan Chase said this week in a report.
A major casualty could be even higher food prices. Ukraine and Russia together are heavyweights in global wheat, corn and sunflower oil trade, leaving buyers from Asia to Africa and the Middle East vulnerable to more expensive bread and meat if supplies are disrupted. That would add to food-commodity costs that are already the highest in a decade.
Added to that are energy prices that may jump out of control in the next few weeks pushing EU economies and those in Eastern Europe to the brink. JPMorgan’s analysts have even tested the possibility of a spike to $150/barrel for Brent oil. That could last weeks or months until trade routes are changed.
Russia is far from being self-sufficient in meat and that was already anticipated by the Kremlin who signed a free trade agreement with Brazil to allow 200,000 tonnes of beef and 100,000 of pork to enter Russia without any tax. That could also signal a future ban on exports for those products and it will be felt harshly in the Vietnamese market, where Russia is the main exporter, with Miratorg exporting 30,000 tonnes of pork in 2021.
In poultry, production in 2021 fell 2% to 6.2 million tonnes, with Cherkizovo ranked No1 in the industry (813,000 tonnes produces). 62,000 tonnes were exported by the Group, mainly to China. That volume may also be retained in the future in the domestic market, as economic sanctions will certainly be imposed for third parties involved in trade with Russia.
On the other hand, Ukraine, which is one of top poultry producers in the world is expected also to keep meat supplies at home, in order to secure both troops and population with food supplies. Nevertheless, Ukraine is highly dependent on Russian gas and oil and disruptions is expected to appear in the supply chain until new suppliers will appear. At the same time, the impact will be felt globally until the market adapts to the context of war looming over Europe.

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