We’ve all seen the news and the conversations around the European grain crisis. You might be wondering how that affects our industry, if at all. The reality is that costs are rising exponentially, the effect of which we’ll be seeing here on African soil all too soon. We did a little deep dive into the factors driving this so that you don’t have to!
For the past five years, global grain production has only just covered annual consumption worldwide. 2021 was a particularly bad year for barley due to unseasonal weather conditions across the northern hemisphere. This resulted in a poor harvest with low grading and, in some cases, loss in storage due to mould from moist grains. As a result, the market was already on the back foot going into 2022. When you add the fact that malting barley cultivation is considerably riskier than that of other types of grain along with the agricultural area in the EU steadily declining, it becomes clear that we can expect shortages and/or cost increases based on these facts alone.
The world watched stunned as Russia invaded Ukraine on 24 February 2022. What is already an awful situation is now seeing ripple effects across multiple market sectors and industries. Russia and Ukraine account for 18% of global barley production and 30% of global exports. The current shortage of malt grains is influenced by the inability to export but we’ll be seeing a knock-on effect in the future as the agricultural regions impacted by the war will not be able to harvest the current crop, maintain fields, or access seed for planting.
The final major factor at play is rising energy costs. Soaring prices across Europe have affected not only production and storage but, most recently, fertilizer. A wave of fertilizer plant shutdowns has begun, including the world’s largest plant in Norway which announced a 50% cut to their ammonia-based urea and nitrogen fertilizer production in Europe, citing “record high prices." Fertilizer is vital for boosting crop soil fertility. Its production creates a byproduct, CO2 gas, which is used for carbonation. The impact this has on the industry is yet to be fully analyzed but we can expect further increases in costs and potential shortages.
With all of these major issues rising to the fore, it’s easy to feel the pressure. While these are all certainly things to bear in mind, we should be thinking ahead! With proper planning and well-informed choices, we can weather the storm.