Amid the dual pressures of Brexit and the pandemic-driven shift in demand from out-of-home to retail, the food and drink industry has focused on supply above all else. The worldwide impacts of the Ukraine war required us to think differently once again.
That’s principally because of the gas embedded through supply chains in inputs such as ammonium nitrate, as well as rampant cost inflation across the board and the fact this is a global phenomenon, not a local situation we can trade our way out of. To boot we must not forget one of the world’s most productive agricultural areas has been cut off because of this dreadful conflict.
Collectively, this time, a calm focus is needed on production. Talking to farmers across the different sectors of British agriculture, the word that keeps coming up is confidence. If they don’t feel the huge outlay of working capital committed in the coming weeks and months will be repaid, output will decline. In some sectors – protected horticulture, for instance – that decline is already happening in the face of shorter cycles and rapidly rising costs. If that production challenge is left unattended, it will eventually become a much bigger supply problem.
Thankfully, some businesses are putting their arms around production, reassuring farmers and growers they will have a return and securing their commitment to produce. They are signaling a willingness to engage, taking time to understand what’s happening to the cost of agricultural inputs and reviewing supply agreements. Many more need to follow their example if we are to do in 2023 what we did together in 2020: keep the nation, and especially the most vulnerable, fed. To do otherwise could risk seeing our producers begin to ratchet back production, in many cases drastically and some irrevocably.
Of course, I know commercial teams are agonising over whether consumers will want to pay higher prices and are concerned about the risk of demand destruction. But without the product there in the first place, that’s not a question we’ll be able to answer.
The government also has a role here. After all, we are talking about one of the 13 pillars of critical national infrastructure. All credit to Defra for the measures they have put in place to make it easier for farmers to use organic manures this autumn, but it’s essential they continue to engage with industry to monitor market trends and farmer and grower intentions.
Even then, as decisions for 2023 loom, if gas remains where it is while Russia and Germany exchange blows on how it will be paid for in Europe, more creative action could yet be required.
Summer is a critical time in the production calendar, both for livestock and dairy farms planning their forage in the autumn and for crops in 2023. This is a key time to signal confidence in smooth ordering of inputs and reliable outputs for the next 18 months. If sourcing options are key to our national food resilience, we cannot overlook the sagging confidence at home, nor can we afford to let our guard down against the risk of trade distortions as governments grapple with the same issues the world over.
Without a miracle of cheap and plentiful supply of natural gas, there are no easy wins. This could be one of the biggest tests for the food industry in living memory. We must plan for the worst and hope for the best – not just for ourselves but for the people of Ukraine.