Korkidis: The food industry is facing the “perfect storm”

It could also be described as the “perfect storm” what is currently called to face the production, processing and trade of the food industry. This is noted in his statements to APE – BPE by the president of the Regional Chamber of Attica and the Piraeus Chamber of Commerce and Industry Vassilis Korkidis commenting on them economic developments because of the war in Ukraine.

As Mr. Korkidis reports supply chain is disturbed by the strong floods of the pandemic with the costs of transit of raw materials to the heights, the energy, therefore with the unpredictable horizon of the Russian-Ukrainian conflict a scene is created “that surpasses even the most galloping directorial imagination” as he notes. The only difference, he continues, is that Europe is experiencing a crisis probably for the first time in its history after the Second World War with such an extent and characteristics.

The Russo-Ukrainian conflict and EU sanctions on Russia have disrupted the flow of mostly soft grains, leading to a spike in commodity prices. A typical case is the price of common wheat for March delivery contracts, he continues, “that is, last month, at the Paris Commodity Exchange, the price, which is a key indicator for the price of cereals in Europe, recently reached 390 euros. per ton from 274 to the beginning of the conflict with the first day of the invasion being close to 350 euros. From this fact it is obvious that eventually the flour mills and bakers will be asked to pay much more than 400 euros per ton, as at least the transport costs should be included “.

At the same time, as Mr. Korkidis, maritime and road transport have skyrocketed, with geometric progress, fuel increases and of course the price of electricity affecting the whole range of grain processing, with the price of bread rising by just over 10 %, cereals 8% and pasta 30%, compared to prices a few months ago. For example, the president of PESA stated that, today, the monthly bill of electricity for production in a small bakery is now 3,000 euros, from 1,000 euros before. At the same time, it remains unknown whether there will be an overall response at EU level. for energy, in order to ultimately contain these costs. “It is obvious, he continues, that from one point onwards neither the flour industry nor the bakeries will be able to continue absorbing the price increases triggered by energy with all that entails.”

There is no danger regarding the food of Greece

Regarding the adequacy of cereals and especially soft wheat and corn, Mr. Korkidis continues, according to the Association of Cereal Importers, there are alternative markets from European countries and the USA. He noted that, recently at a meeting of the board. of the EVEP, during which a first assessment of the crisis horizon was made, recorded the oxymoron of the fact that for the last 25 years no import of soft wheat from the USA has taken place. Greece imports a total of about 900,000 tons per year and will have to look for a way to cover 30% of the common wheat that represents 250,000 tons and is imported from Russia and Ukraine. It should be noted that our country is a producer of 1.7 million tons, but also an exporter of durum wheat, as well as 300,000 tons of common wheat and therefore there is no risk regarding the food of Greece.

At this point, as he stressed, we must take into account the reaction of the consumer public. Because, although so far, we have not seen “panic scenes” on supermarket shelves, which I avoid to see, nevertheless there is a slightly increased demand for flour and pasta with a portion of the consumer rushing to build stocks for fear shortages and price increases with supermarkets rushing earlier this month to increase their relative stocks.

“And it’s not just bread and pasta,” he said. According to him, the food supply chain is not the only issue we need to worry about when counting the negative effects of high oil prices. Any industry based on oil for fuels, fertilizers, animal feed, petrochemicals or other related products will come under pressure in the coming months. Pressure, which is intensified by the transport costs themselves, due to the peculiar situation in the supply chain, with the container rental prices still at historically high, but also by the additional costs for their road transhipments to ports, due to delays. service of ships, but also the costs incurred by the “stalies”, ie the debit times of depositing cargo within the port zones.

In addition, rising energy bills are scaling up the cost of producing fertilizers and transporting goods around the world, leading to developments reminiscent of those recorded during the 2008 and 2011 food crises.

It is obvious, Mr. Korkidis notes, that the impact starts “from the field to the shelf” with consumers facing prices that increase disproportionately to their income so they do not just have to pay more money. compared to before, but to raise this money from an insufficient income.

Another “collateral loss” from the logistics situation to import trade is coffee, which the president emphasizes, with most of it stuck in transport, with demand not being met, forming the final prices taking into account processing costs.

Respectively, in the “collateral losses” is sugar, he continues, with the crisis in this product appearing from the end of last year and today and this product is affected by the cost of electricity and transportation.

“Generally, wholesale and retail trade is facing an unpredictable development as, under the state of constant restructuring of raw material prices, transport costs and processing costs, it is now forced to restructure prices on a weekly basis, not because it aims to profit growth, which the crisis evaporated, but because the basic wholesale tariffs follow the rising. “Despite the precision” Armageddon “faced by food companies, they must not” bend “from energy costs and the food chain in the EU-27 must not be broken,” concludes Mr. Korkidis.

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