Last week we reported on the government’s announcement of a new round of negotiations between distributors and their suppliers on food entry prices. The annual negotiations, which began in November, ended on 1uh March. But the war in Ukraine has revived speculation in oil and gas, as well as in wheat, corn and sunflowers, which rose 36%, 30% and 40% respectively in two weeks. Speculators are betting that Ukraine’s cessation of exports of wheat, corn and sunflower seeds will increase the risk of global shortages and lead to sustained price increases. Moreover, Russia also plans to reduce its exports so as not to increase prices in the domestic market.
In France, the first victims of rising prices for grains and oilseeds are livestock farmers who buy compound feed for pigs, poultry, cows, goats and dairy sheep, not to mention the herbivores we fatten for slaughter. Hence the government’s request to revise the barely signed annual contracts. Because the 3 to 4% increase received by thousands of SMEs in the agri-food industry for entry prices will not allow them to survive if they have to pay prices for agricultural raw materials, taking into account production costs.
Feed for pigs reaches 70% of the cost of production
As a result of the first meeting in Brussels last week on the crisis in pig production, the following comment could be read in the bulletin “Meat Culture” dated March 17, published by the trade union of meat manufacturers: “In light of the events in Ukraine, animal feed was discussed at the first meeting . The price of feed for pigs, which has risen in price by 30%, according to experts’ forecasts, will show a further increase by 30%. The cost of feed in the price of pork is now 70% of production costs compared to 62% a few months ago. Self-sufficiency and independence in animal feed are the goals for Europe, but the reality is very different: during this meeting, many countries, including Spain, warned about their stocks of animal feed, which do not exceed 15 days!
However, pig farmers have been the victims of too low prices since the end of summer 2021, after a decrease in orders from China from EU member states. These European exports have skyrocketed in two years because African swine fever has drastically reduced production in China. But China has rebuilt its herd and at the same time reduced imports. As a result, intra-European competition has led to a fall in prices, while the cost of production will rise for a long time due to speculation in cereals.
France lost 651,000 cows in five years
Rising oil and gas prices also increase the cost of agricultural products and the agri-food industry. Nitrogen fertilizers are used to grow grass in meadows, the production of which is very gas-intensive. Higher oil prices are also driving up production costs, through the price of fuel oil for agricultural tractors and diesel for trucks transporting milk harvested from farms to dairies. Hence this alarming cry issued by the National Federation of Dairy Producers (FNPL) on March 17: “The FNPL wants to be able to defend the conservation of the dairy herd in all territories, and for this we need strong axes: targeted cyclical assistance, because it is unthinkable for us that public authorities allowed the decapitalization of the French dairy herd and the resumption of commercial negotiations on the prices of dairy products, which must necessarily begin with the price paid to the producers, in order to build the selling price as provided for by the law of Egalim2”.
The decapitalization referred to by the FNPL is already under way for dairy herds, as well as beef dairy cattle, including Charolais, Limousine and Blonde d’Aquitaine. In five years, the number of cows that bring a calf per year has decreased by 651,000 heads, which is about 7% in two herds. Having not received a sufficient price for milk, as well as for meat from the farm, breeders sold breeding animals in order to be able to pay for draft animals.
The conventional wisdom is that this under-remuneration of breeders needs to be stopped or could jeopardize our food sovereignty. It is also clear that food prices, which have already risen by an average of 3-4%, and pasta even by 13%, will rise even more in the coming months. It also shows that there is an urgent need for higher wages, for example, old-age pensions, when in less than three weeks the country votes to elect the president of the republic, and then in June to elect deputies.