The impact of hostilities in the Middle East is very broad and will also reflect on the rise in food prices, predicted in an interview with the LETA agency the head of the agricultural market support department of the Institute of Agrarian Resources and Economics, leading researcher Inguna Gulbe, while adding that no one can currently predict how significant the rise will be, LETA reports.
She noted that currently the impact of this conflict is not visible on store shelves, as both producers and traders operate on a long-term basis — they have contracts for three, six, nine, even 12 months. New products, the prices of which will be affected by problems in the Middle East and the blockade of the Strait of Hormuz, will become more noticeable in the second half of the year.
Gulbe said that one of the components affecting food prices is fuel, but there are also other resources that impact agriculture and food production.
"Fuel is necessary in food production — starting from sowing, harvesting, drying grain, delivering milk to the processing plant and then to the store, but farmers need many different resources. We also hear about mineral fertilizers, and up to 40% of the world's volume of certain types of fertilizers passes through the Strait of Hormuz. If they are stuck there now or have not arrived, it means that a significant portion of farmers around the world will not have what they need to nourish their plants. If they are not fed, they will not grow big, quality, with a lot of seeds, and so on — the harvest will simply be smaller. Additionally, oil is widely used in the food industry in various packaging. Thus, there are many points of influence," Gulbe said.
She also suggested that, most likely, the first to suffer from the current situation in food production will be India and similar regions.
"I hope that in the Baltics we will not feel this at the very beginning, because we already have the experience of 2022, and a significant portion of farmers have reserves. The season is starting, and a good host usually thinks a few steps ahead. For spring sowing, most have mineral fertilizers, and some even for autumn. But, of course, this uncertainty and unknown — whether it will be or not — does not bring anything good, and mineral fertilizers are a very large expense: in crop farming, they account for about 40% of all costs. At the same time, large reserves cannot be maintained because there are no funds to purchase such an expensive resource in advance for a year. Therefore, it is simply impossible," Gulbe acknowledged.
At the same time, she urged buyers to remember the experience of previous crises and not to start creating large food reserves.
Gulbe emphasized that Latvia can fully provide itself with food, there will be no shortage, and if one product cannot be purchased, it can be replaced with another. Therefore, the question is only about price. In turn, by creating a panic themselves, buyers give traders the opportunity to take advantage of this and raise prices further.
"Don't empty the shelves of buckwheat — you still won't be able to store it for years: food moths will infest it, and everything will have to be thrown away or given to animals. As soon as we start hoarding something to the point that the shelves are empty, traders take advantage of this. A panic effect arises, and we harm ourselves. So let's keep our common sense," Gulbe urged.
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