The ripple effect of the Ukraine war is spreading fast and is being felt in countries far from Europe’s eastern borders. According to the IMF, average food inflation worldwide had already hit 7.8 per cent in January, the highest level in seven years. Worse is yet to come: wheat prices have been driven to a 14-year high in the first week of the Ukraine war.
Malta imports all its grain even if no wheat is imported directly from Ukraine. Still, it would be dangerous to underestimate the systemic shock that this war in the breadbasket region of Europe has had on the grains market. Supply disruptions from Russia and Ukraine, which account for 30 per cent of the world’s trade in wheat and 20 per cent of corn exports, will erode food security for millions of people. Malta is just as vulnerable as many other countries.
The problem is exacerbated by the temptation of countries to resort to protectionism. Marco Cachia, the chief executive of Federated Mills, which supplies milled flour to around three-quarters of Maltese manufacturers, sounded the alarm when he said that Hungary [a regular supplier of Federated Mills] had decided to stop all exports of wheat. “We are hearing that other countries may follow suit. If this happens, we could have a problem.”
Nationalist Party spokesperson Peter Agius has taken the initiative of sending a letter to two European commissioners to highlight that Hungary’s restrictions breach the provisions of free movement of goods in the EU.
The following day, Times of Malta spoke to a number of other food and beverage producers that rely on wheat and other grains. The verdict was unanimous: they are expecting the war to drive up costs.
People may not yet feel unduly impacted by these fast-developing trends. But when existing stocks in mills and bakeries begin to run out, many of them will have to face the prospect of either paying the higher cost or not getting the flour they need for their production.
Bread is one of the fundamentals, the essentials that sustain people’s lives. People with adequate financial means will see their buying power eroded but the financially vulnerable, those already on the breadline as it were, will face significant risks to their well-being.
Even if the military phase of the Ukraine war was to end soon, grain exports and prices are unlikely to return to normal anytime soon. Even before the war, the lack of sufficient transportation facilities and bad harvests in some countries put pressure on food prices. In addition to grain prices, farmers worldwide are likely to feel the impact of the rising cost of fertiliser, of which Russia and Belarus are the leading producers.
The Federated Mills CEO may have been stating the obvious when he argued that Malta needs to come up with a strategy to deal with these threats, seeing they will result in higher consumer prices. Ignorance, in this case, is not bliss.
It would be wise to open our eyes and prepare ourselves for the likely blows to come to our well-being and prosperity.
During this election campaign, the country’s political leaders seem to be living in a time warp, seemingly oblivious to the fast-deteriorating international economic and political realities.
The risk of food insecurity and galloping inflation must be addressed without further delay, lest the well-being of thousands is put at risk by a lack of planning.
People have a need and a right to know how the government is planning to tackle the problem of food insecurity.