GEN gas pipeline AdobeStock_47231599

Price rises for gas and oil are in the pipeline (Photo: Adobe Stock)

The war in Ukraine will have a number of major implications for the international fresh produce business, including damage to consumer confidence, a reduction in overall market demand, a rise in production costs, and disruption to shipping services.

Those are some of the headline conclusions drawn by Cindy van Rijswick, senior fresh produce analyst at the Food & Agribusiness division of RaboResearch, as the full impact of Russia’s invasion continues to be assessed.

The dampening effect of the war’s economic disruption on Ukrainian imports, and of western sanctions on Russia’s purchasing power, is likely to be without precedent.

In 2020, Russia’s fresh fruit and nut imports were worth US$5.2bn, almost 4 per cent of global imports, while Ukraine’s spending on imported fresh fruit and nuts amounted to a not insignificant US$794m.

Much of that trade will be lost, and the knock-on effect for other major markets will be considerable. “As the conflict will reroute trade flows to other destinations, the crisis will definitely have an impact on the US and EU markets too,” says Van Rijswick. “Fruit destined for Russia and Ukraine will be redirected to other markets, possibly leading to oversupply and price pressure.”

But it is the rising cost of production, inflated by soaring energy prices, that now appears to cause most concern.

“Costs for oil, natural gas, packaging, fertilisers, and transportation are already high, and the current crisis will reinforce cost levels,” Van Rijswick tells Fruitnet. “Oil prices could rise from around US$90 to between US$120 and US$135, while gas prices could rise by 30-50 per cent, to between US$175 and US$215.'

While higher fertiliser costs will affect growers around the world, greenhouse growers of vegetables, berries and flowers in northern Europe will be most exposed to further increases in the price of natural gas, she adds. “Before 2021, natural gas accounted for about 20 per cent of the cost price of Dutch greenhouse growers.”