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Crisis in Ukraine forces up world wheat prices

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By Nicholas Robinson+

Last updated the 01-May-2014 at 16:32 GMT

Political instability in the Ukraine has reinforced the UK’s need to increase its own food security and production, National Farmers Union (NFU) president Meurig Raymond has warned.

The crisis was causing uncertainty in the EU’s food supply chains, since the Ukraine and countries surrounding it were an important source of global grain supplies, said Raymond. “But in the last couple of weeks, since the start of the crisis, the market got extremely nervous,” he added.

Farmers in the Ukraine have started to withhold grain from sale in a bid to protect the country’s falling currency, causing prices to rise. “We saw Chicago grain futures went up £10 or £12 [per tonne] within a couple of days, so that’s the volatility and uncertainty we’re starting to see,” said Raymond.

Immediate threat to the UK

Raymond didn’t think the crisis in the Ukraine posed an immediate threat to the UK, but he hoped Russia would not invade the rest of the country for fear it would have a much bigger impact.

“This crisis proves to me that we need to further improve our production in the UK,” said Raymond. By relying on other countries to supply large amounts of raw materials, the UK was leaving itself open to problems, he said. Not raising home production would “certainly increase the volatility in the price of food,” he said.

Increasing UK food production was vital for sustainability, he added. “We need better relationships and partnerships – from farmers through to processor and retailers – and greater understanding from all parties to do this.”

Now more concerned

Last year’s horsemeat scandal had focused attention on the UK’s food supply chain, but the crisis in the Ukraine would bolster that interest, he said. Consumers were now more concerned about what was on their plates and where their food came from, with 79% in a recent NFU survey saying they wanted to buy more British food, he said.

Meanwhile, food manufacturers were warned by food law firm Roythornes to protect themselves against the likes of the Ukraine crisis by building flexibility and clauses into contracts with their customers that allowed them some leeway when it came to delivery volumes and lead times.

Peter Bennett, head of the food team and partner at Roythornes, said that if they didn’t protect themselves, manufacturers could see their costs increasing and margins squeezed.  

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