As the war in Ukraine rages on, fears for global food security are growing. Even from the relative stability of Belgium, consumers are already feeling the effects. Now, it’s producers who are sounding the alarm.
According to Fevia, the Federation of the Belgian Food Industry, up to 40% of food producers in Belgium are planning to temporarily halt or reduce their business.
Around 12% of the world’s calories come from Ukrainian and Russian wheat. The war may prevent Ukrainian farmers from harvesting their crops in the near future and Russia has blocked ships exporting grain in response to international sanctions.
This has had a profound impact on the global supply chain. There are even fears that supply shortages could worsen famine in vulnerable regions of Africa.
Hard times ahead
The trade federation surveyed 700 of its corporate members to understand how they were dealing with the supply chain impacts of the war in Ukraine. The results are worrying.
Around 50% of Belgian food producers are facing shortages of ingredients such as oil and flour needed to make their food. Last year, rapeseed oil was available for €750 per ton. Now the same amount will cost €2,200 – almost three times as much.
Around 70% of companies have had to make changes to their products, or will have to do so in the near future. Products may even begin to taste slightly different. The Belgian government has allowed producers to use substitutes for ingredients that are short supply.
For example, manufacturers of frozen chips or mayonnaise can now use alternative oil types, such as peanut or soybean, even if it does not match what is written on the label.
Belgian consumers may also have noticed that they are also getting less for their money. Producers are struggling to pass on their costs and are therefore reducing the total amount of the food they produce.
This is known as “shrinkflation.” Open a packet of crisps, for example, and you may realise that there are a few less in the packet than usual, but at the same price.
Industry in trouble
Although the prognosis for the food industry is bleak, this wasn’t always the case. In 2021, the sector bounced back. The Belgian food industry drove economic growth, with a total turnover of €61.4 billion. The sector provided almost 100,000 jobs to Belgians.
While the industry began to recover from the effects of the pandemic, one thing that has not improved is the sector’s profitability. High supply costs from the Covid-19 pandemic have been replaced with even higher costs from the war in Ukraine.
“During the pandemic, many food companies were already up against the wall due to shortages of raw materials and the sharp increase in the cost of materials, energy, packaging, and transportation,” explained Anthony Botelberge, President of Fevia.
The price of wheat has increased by more than 50% since February. The EU acquires up to 45% of all its vegetable oils from Ukraine, which are now in short supply.
The food production industry is energy-hungry and the conflict in Ukraine has driven bills through the roof. About 50% of Belgian food producers have seen their bills double, over a third saw them triple.
“At the beginning of the year, it seemed that we would finally be able to extinguish these flames, but the war in Ukraine has, unfortunately, fanned the fire again. If we cannot pass on these costs, it will no longer be profitable to continue production,” the industry expert warned.
Fevia states that supermarkets are “not very open to discussing price increases”, which makes it hard for manufacturers to pass on costs. “This is a stress test for the entire food chain… In these extremely difficult circumstances, we can only get through this together,” Botelberge said.
The food production sector is now appealing for greater government support, including even more flexibility in labelling legislation, which will allow companies to save on raw materials and compensate for shortages.
Fevia assures that this will not come at the expense of food safety.