Scott Wellcome, Director Grain Risk Management & Sourcing at GoodMills, shares his views on the consequences of a potential end to the war in Ukraine, as well as the long-term effects of the green transformation in agriculture.
We have some grounds for optimism: at present, there are signs that the war in Ukraine could soon be drawing to a close. Developments are still shrouded in uncertainty, and it’s unclear what form peace negotiations could take.
Any end to hostilities will probably only have a minor impact on the European grain market: last year, there were very few obstacles to Ukraine’s grain exports, as 70% of the harvest was shipped overseas via the port of Odessa. So if the war did end soon, this would hardly influence the flow of grain.
The effect on prices would probably be manageable, too. The end of the conflict would remove the need for risk premiums. Lower logistics, insurance and transportation costs could help to push prices down, although not by much – by 5-10% overall at most. The actual effects of a lasting peace would only emerge between three and five years after the fighting ends. Ukrainian farmers will be heavily dependent on international aid in order to rebuild infrastructure and continue operating.
“As a society, we also need to realise that higher food prices in the short term will lead to increased security of supply in the long run.”
In the meantime, Europe’s agricultural sector is continuing to focus on the green transformation. Sustainability is on everyone’s lips and discussions have brought about a number of advances. People are no longer asking who will foot the bill. At the end of the day, we all need to play our part in order to achieve sustainable effects. And as a society, we also need to realise that higher food prices in the short term will lead to increased security of supply in the long run.