Lintilठreiterates concern about food prices after criticism from experts
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Loading... - Erno Jarvenen
- 15 Mar 2022
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Minister of Economic Affairs Mika Lintilä (Centre) has reiterated his assessment of food prices after coming under criticism from experts.
Lintilä on Saturday stated on YLE TV1 that Finnish households could be spending twice as much of their disposable income – “well over 20 per cent” instead of 11 per cent – on food as a consequence of the invasion of Ukraine by President Vladimir Putin’s Russia.
He reiterated his assessment in an interview with STT on Monday.
“If we look at the developments we’ve seen in production input and indirect costs, I don’t think its at all impossible,” he argued, saying the estimate is based on discussions with various industry representatives.
Food prices, he reminded, are determined by a number of factors, such as energy, fertiliser, transport and packaging material costs, and raw material availability. “You have to understand that the primary product doesn’t necessarily double, but the increase stems from indirect costs,” he explained.
Lintilä on Monday also estimated that a financial support package worth hundreds of millions of euros should be put together without delay to alleviate the situation of agricultural producers.
“We’re talking about critical weeks – this week and next week is when we’ll have to come out with the decisions [on the support package],” he said. “Ukraine has an absolutely central role in the global market when it comes to wheat. It’ll cause significant price increases very widely through several multiplier effects.”
“I’m still of the view that the elements of a European or even global food crisis are in place. Unfortunately.”
Russia and Ukraine together have accounted for almost 30 per cent of global wheat exports, 20 per cent of corn exports and 80 per cent of sunflower oil exports. Russia being one of the world’s largest oil and natural gas producers, the war has also pushed up energy prices, a key driver of food inflation in many developed countries.
Jyrki Niemi, a research professor specialising in food markets at Natural Resources Institute Finland (Luke) on Monday stated to the Finnish news agency that even a 100-per-cent rise in food prices would not result in a doubling of household food costs, as the rise would prompt households to choose more affordable food products.
“If we start with the presumption that the war will be limited to Ukraine and doesn’t escalate wider, I don’t think it makes any sense to talk about the doubling of prices,” he said.
Luke expects food price increases to outpace, and possibly spur, inflation but remain in the region of 5–10 per cent.
Niemi acknowledged that food prices are under considerable pressure from surges in the cost of energy, fertilisers and other inputs. An increase in grain prices, for example, creates pressure for an increase in the animal feed prices and, consequently, meat prices.
“Of course the situation in primary agricultural production is difficult at the moment. There’ll have to be increases in consumer prices so that the work can continue,” he said.
The costs of agricultural producers, however, are not rising dramatically on all fronts, with fixed and wage costs only rising relatively modestly. Read More...
