Food manufacturers

Local food makers reeling as costs rise by up to 400%

Local food manufacturers are feeling the pain of war in Ukraine, with the cost of raw materials rising by up to 400%.

Manufacturers may not be able to continue to absorb price increases and may have to pass the costs on to consumers.

“Hell broke loose” even for snack producer Twistees and Tastees, as the dispute rages on, affecting the availability and shipment of certain items.

Steve Calleja, managing director of Strand Palace Agencies Ltd, manufacturers and importers of an extensive portfolio of food brands, painted a grim picture of the impact of war on the family business.

Russia’s invasion of its neighbor a month ago caused major disruptions to global economies, sending commodity prices skyrocketing in a world already hard hit by the pandemic.

The two warring countries are among the largest exporters of agricultural commodities, including wheat, corn, rapeseed, sunflower seeds and sunflower oil.

Calleja said prices for some items had risen “significantly” – by more than 400% – since the start of the year, and quotes were only valid for a few hours.

“We’ve absorbed the price increases, but we’re getting to a stage where we need to reassess,” he warned.

As for availability, Calleja said some suppliers had stopped exporting as their stocks were kept for domestic consumption.

Besides Ukraine and Russia, these countries also include Bulgaria and Turkey, he said.

“We are also facing increased shipping issues as the ports are full of containers that were meant to be shipped to Ukraine and Russia and they have no space to unload other containers, which means that they should be diverted to other ports,” he said. .

Calleja said his company has no choice but to raise the prices of imported ready-made products, as they are imposed by suppliers.

Malta’s manufacturing industry is particularly vulnerable to imports of key commodities from Ukraine and Russia, the Malta Chamber of Commerce recently warned.

Food manufacturers are highly exposed to shortages and price hikes due to their heavy reliance on Ukraine for products such as rice starch, which is entirely imported from the war-torn country. , while oats, corn starch and crude sunflower oil each account for more than 80% of total imports.

The popular and staple snacks, Twistees and Tastees, are made from rice and edible vegetable oil is one of the main ingredients.

The products used by Consolidated Biscuit, the cracker, snack and cookie company, are made entirely from wheat, sugars and oils.

Although it does not import these raw materials from Russia and Ukraine, it is not immune to the effects of the conflict, said its managing director Robert Ellul.

These countries supply much of the global food chain, causing a ripple effect, he explained.

Prices for the company’s ingredients had been rising since mid-2020. But when war broke out last month, “they just exploded”.

And the food industry has yet to see the worst, Ellul warned.

Everything flies away and continues to rise

The company was already paying 35% more in November, but “everything is skyrocketing and still going up,” he said.

The price of corn and vegetable oil has more than doubled compared to a year ago.

The price of cartons used for storage has increased “phenomenaly” – by more than 30% – compared to last year.

He said that globally, some markets have shut down their exports to keep them to themselves, creating more supply issues that continue to drive up prices.

The huge demand is making the situation worse, with companies everywhere trying to secure supplies in a bid to cover the next few months for some peace of mind, creating a rush for raw materials.

The company’s sale of dry foods, such as biscuits and pancakeskyrocketed in February, he said, adding that bread alternatives, which can keep for months, are what consumers stock up on during tough times.

For almost three weeks, the suppliers did not even provide quotations for their products, the war having paralyzed everything.

“International suppliers cannot engage because they don’t know what will happen with the next harvest and the market is too volatile.”

What happens next is a question mark, Ellul said.

“If countries at war drastically reduce grain and oilseed plantings in the coming weeks, the situation will get worse.”

Consolidated Biscuit, the maker of Devon biscuits, is having manufacturing issues.

The biscuit company, which includes the flagship Devon brand in its portfolio which it distributes widely, “would continue to move forward” despite the imminent risk of shortages and the impossibility of manufacturing its products.

In the absence of other alternatives, food manufacturers should look beyond buying their supply from free trade zones and consider resorting to countries where they had to pay duties.

This would continue to make the problem worse, Ellul said, adding to the mix that the island had to ship everything and the supply chain was disrupted, with huge delays in delivery times, further aggravating the situation. .

This week, France called for an urgent international food security plan on the war in Ukraine to avoid an “inevitable famine” in vulnerable countries within a year.

President Emanuel Macron has urged Russia to show responsibility by allowing agricultural production in Ukraine as the main grain exporter.

The UN says world grain prices have already risen above where they were during the Arab Spring uprisings in 2011.

He warned that the conflict could cause a “hurricane of hunger and a collapse of the global food system”.

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