New risk for Ukrainians’ wallets: how the war in the Middle East will affect food prices
7 March 12:14
The escalation in the Middle East may affect food prices in Ukraine, especially imported vegetables. The fastest price increase may affect tomatoes and cucumbers, more than 80% of which are imported from Turkey.
This was reported to Delo.ua by Maxim Gopka, an analyst at the Ukrainian Agribusiness Club (UAC), according to "Komersant Ukrainian".
Global risks for Ukrainian prices and internal factors
The situation in the Middle East may affect food prices in Ukraine, in particular due to factors such as:
- energy (due to rising oil and fuel prices);
- logistics (risks to sea routes, delays, and rising insurance costs).
Gopka added that, in addition to these global challenges, domestic factors also affect food prices:
- a sharp jump in retail fuel prices in Ukraine;
- the rise in the dollar exchange rate (by 1.4% over the last month).
These factors increase logistics costs and the cost of imported components in the supply chain (seeds, fertilizers, packaging, equipment), which are critical even for domestic producers, explained the UACB analyst.
Price increases: vegetables are first in line
“The fastest and most noticeable price increases will affect imported and greenhouse vegetables and fruits (for example, tomatoes and cucumbers, more than 80% of which are imported from Turkey),” said Hopka.
According to him, since this category of goods has a fast turnover of stocks (from several days to weeks), any increase in logistics, insurance, or currency fluctuations changes the price tags. Currency and fuel factors affect these products simultaneously, so they are the first to react to any economic changes.
As reported by EastFruit project analysts, prices for greenhouse cucumbers and tomatoes reached a historic high in February. Wholesale prices for cucumbers ranged from 135 to 165 UAH/kg, depending on the quality and volume of the batch. Tomatoes were slightly cheaper, at 120-140 UAH/kg.
“Prices for meat and dairy products will also rise, but with a delay of one to three months,” said an analyst at the Ukrainian Agribusiness Club (UAC).
Feed and meat producers often have long-term contracts and stocks that temporarily hold back price increases, and high domestic supply is currently preventing meat prices from rising rapidly (although a noticeable increase may come closer to Easter), Hopka explained.
However, dairy products may increase in price slightly faster due to the high energy intensity of their processing and the need to maintain a “cold chain” during transportation, which directly depends on the cost of fuel, Delo.ua’s interlocutor noted.
“It is difficult to predict exactly how much prices will rise at this stage, as active hostilities involving many countries are continuing in the Middle East, which makes the situation unpredictable,” the expert noted.
In the near future, according to government forecasts, domestic stabilization and even a decrease in fuel prices are expected, so there are no obvious reasons for a significant and rapid increase in food prices, Gopka emphasized.
“However, in the next month or two, price dynamics for certain food segments in Ukraine will depend on further developments in the Middle East,” he added.
