Why the Food Crisis Will Pass
“Sanctions against Russia could be maintained for quite some time. And since we were already at the beginning of a food crisis and entering a period of high energy prices, it may take the bubble a bit longer to burst. Energy and grain prices are closely correlated. Furthermore, surging fertilizer prices could postpone an increase in agricultural production.”
Nevertheless, in the slightly longer term, his assessment is that the governing trends will limit the duration and scope of the crisis:
“It’s easier to predict 10 years ahead than 30 days. But the fundamental megatrends in the agricultural sector are quite predictable – they have prevailed for the past 100 years and will continue. All in all, agriculture is fundamentally quite sound,” says Henning Otte Hansen and elaborates:
“There are about 30 conditions that affect grain prices. Then there are a handful of possible ‘game changers’, with war being one of them. But in the big picture, game changers are ripples. The underlying, supporting forces are still there: Farmers produce more year after year, achieve higher yields, breed better grains and have better technology.”
How High Prices to Expect
According to Henning Otte Hansen, we should expect the price of cereal products like bread, oats and flour to increase by about 20%, while the price of products like meat and milk will probably increase by 5-10%.
Otte Hansen’s guess is that prices will peak in a year.
Larger Grain Stocks Are a Good Idea
Henning Otte Hansen suggests that it would be a good idea to build up slightly larger global grain stocks under the auspices of the UN. Grain stocks are currently able to cover about two months of consumption, as they have been depleted over the past few years.
“Grain stocks can be a welcome buffer in situations like this. We can see that whenever grain stocks are limited, foodstuff prices are higher So, larger grain stocks can stabilize the market. Whenever there are poor harvests, you can sell from the stocks,” says Henning Otte Hansen.
Budget for It
The overall assessment of the crisis does not mean that acute problems, such as those now being faced by urban populations in developing countries should be downplayed. Hansen emphasizes:
“In many low-income countries, people spend a much larger share of their budget on food than we do in our part of the world. Some form of relief may be necessary. Even in Denmark, certain vulnerable groups will be hit harder than most – and politically considerations could be made for providing some type of support,” says Henning Otte Hansen, who continues:
“But for the average Dane, who only spends about 10% of their income on food, it is probably better to budget for it by, for example, saving on expenses that could be postponed, buying more discount goods and limiting food waste”.
