Kremlin interference in Ukraine raises food prices in the Balkans

05/05/2014

Global instability is starting to affect food prices in regional countries.

By Bedrana Kaletovic and Drazen Remikovic for Southeast European Times in Sarajevo and Podgorica -- 05/05/14

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Prices for wheat produced in Ukraine are rising, affecting world and regional markets. [AFP]

Instability in Ukraine is having an impact on food producers in the Balkans, and analysts warn that consumers may face still higher prices.

"Considering the price increases on the world markets, we won't be able to avoid a rise in crop prices in Bosnia and Herzegovina (BiH), since we don't produce enough and we depend completely on imports," Miro Pejic, president of the Farmers' Union of BiH, told SETimes.

The rise in prices will affect the standard of life in BiH, the union said.

"It is expected that the bread makers will adapt their products to the new prices which means that bread is about to get more expensive as well as hundreds of other grain-based products," the Farmers Union of BiH said in a statement.

Ukraine is the world's third-leading producer and exporter of grains, but the country's economy is being affected by Kremlin-backed insurgents that are disrupting many eastern Ukraine communities. An estimated 40,000 Russian troops on the border are keeping tensions high.

Wheat and corn, as well as other grain products, are also the base of food for livestock. Higher prices for cattle feed means a higher price for meat.

"Sales of chicken have long been on the rise since the lower standard of life does not allow luxuries such as veal meat," Sead Jelic, of the Agricultural Association in BiH, told SETimes.

The price of corn has risen by 40 percent in the past year, and the cattle breeders in the region fear that it won't stop there.

Because of the rise in costs for meat production, due to the rising price of cattle feed, meat producers in the region have already corrected prices. They opted to do this in order to maintain a sustainable production level, as well as to keep workplaces open.

"This is a path that will lead an already damaged cattle industry into a real disaster," said Muradih Husaricic, the owner of a beef farm. "Tradesmen don't care since they'll be selling foreign meat, but one can't speak of quality then. Where, and for how long, prices will continue to rise depends on the situation in Ukraine, as well as on the world markets."

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The rising prices for wheat and grain have also affected meat prices in the region due to a rising cost for cattle feed, experts said. [AFP]

Although BiH has wheat production potential, farmers don't produce the crop due to the low payoff of investments and lack of government initiatives.

Citizens of BiH fear increased prices for basic goods.

"The price corrections normally start with electricity getting more expensive, followed by earth gases which we get from Russia, so it's to be expected to see changes there as well, due to the events in the Ukraine. All of this will further worsen the standard of life for citizens," Branko Kusturic, a Sarajevo resident, told SETimes.

"A country that doesn't have its own production doesn't ask for pricing when it has no choice but to buy. This is a vicious circle in which the small countries suffer the most due to an aging mechanisation and bad agricultural politics," said Ruza Stamenkovic from Bijeljina.

Although Macedonia is not a large consumer of Ukrainian wheat and corn, world wheat markets are affecting Macedonia, Nikolcho Gjorgjiev, president of the Mill Bakery Industry Group, told SETimes.

"The price of wheat in the world markets has increased by 30 percent as a result of the Ukrainian crisis. The crisis in Ukraine will lead to a general disruption of the wheat market, and we are part of that," Gjorgjiev said.

Due to high transportation costs to import wheat, regional companies import from Serbia, Bulgaria and Croatia, the Economic Chamber of Macedonia said.

"At the moment, the price of wheat in Macedonia has increased by 3 to 4 percent, and escalation is not expected unless there is a full embargo on Russia. Then, their exports would not be possible. In that case, there will be some serious market disruptions," Biljana Peeva, a director of the Economic Chamber of Macedonia, told SETimes.

The evolving situation in Ukraine is expected to also affect other aspects of the economy such as tourism. Montenegro predicts that the country's income from tourism will be lower because Ukrainians make up a significant portion of the country's visitors.

According to figures from last year, Ukrainian tourists are fifth in the total number of tourists who visit Montenegro.

"It is certain that there will be a decline in the number of tourists, which automatically means less money for Montenegro," Miro Blecic, professor of economy at the University of Montenegro, told SETimes.

"Also, there are a host of other negative effects that every crisis drags along, including export and import of goods. The situation in Ukraine is very serious and uncertain, so it is possible that the negative economic effects will reflect in Montenegro and the entire region, in a long-term sense."

In Serbia, many are watching the fuel situation, as the country relies on energy supplies from the Eastern region.

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Tomislav Micovic, secretary general of the Association of Oil Companies in Serbia, said the price of fuel is extremely sensitive to political crises, but the country does have some room to manoeuver pricing.

"So far, there is no significant increase in the price of oil products. In the case of serious disorders on the oil market, the government can reduce the excise tax on fuel by 20 percent and to protect its citizens from the high increase of fuel prices," Micovic told SETimes.

Correspondent Miki Trajkovski in Skopje contributed to this report.

How will the rise in food prices affect you and your family? Share your thoughts in the space below.

This content was commissioned for SETimes.com.
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