Dear gas, the perfect agribusiness storm

Dear gas, the perfect agribusiness storm
Dear gas, the perfect agribusiness storm

Expensive energy is just one of the many faces of what in the agri-food sector they bluntly call “the perfect storm”. Gas, as is well known, costs more and more and brings with it the price of electricity but it is not the only problem with which companies in the supply chain have to deal. food. There are bottlenecks in supply chains and the rise in freight rates for container transport which in turn push up the prices of raw materials, some already struggling with increases caused by seasonal problems. Within a year the price of durum wheat has doubled, that of soft wheat has grown by 60%. The list is long: according to Coldiretti data, cereal prices have grown by over 23% in a year, dairy products by about 20%, sugar by over 40% and vegetable fats over 50. %. It is not over, because every agri-food company has a long series of costs to face and almost all of them are generally increasing. An example are those for packaging, from plastic for flower pots to steel for jars, from glass for jars to wood for transport pallets and paper for product labels that affect different supply chains, from milk packs, to bottles for oil, juices and purées, to nets for citrus fruits to enameled jars for legumes.

Materials produced largely by highly energy-intensive companies and therefore even more affected by increases. “There is a set of factors that has affected our sector”, Luigi Scordamaglia, managing director of Filiera Italia, the foundation that brings together the Made in Italy agri-food industry, told HuffPost, “and is well photographed by Istat in a given released a few days ago: in October the production costs of food goods increased by an average of 5%, in some cases less and in others even by 20 or 30%. But in the face of these increases, there is no corresponding increase in consumer prices, which rose by only 1% on average. This means one thing: at this rate, Italian companies either start importing poorer quality products from abroad, or they close “.

Gas, on the other hand, is fundamental in the fertilizer production process, and for this reason the prices of fertilizers have skyrocketed, with urea going from 350 euros to 850 euros per ton (+ 143%), phosphate diammonium dap doubled (+ 100%) from 350 to 700 euros per ton, while extraction products such as mineral superphosphate recorded + 65%. Fertilizers based on nitrogen, phosphorus and potassium, which also undergo a strong surge (+ 60%), are not exempt from the increases. The increase in energy costs also affects the heating of greenhouses for flowers and vegetables, but the costs for drying fodder, agricultural machinery and spare parts are also increasing, for which there are even worrying delays in deliveries.

However, for an Italian company to transmit even just a part of this long series of increases in consumer prices is not so simple. There is a wall called large-scale distribution, large-scale distribution: “We are negotiating with the main operators of large-scale distribution for an increase of 20 cents per kilo for pasta, but I don’t think it will be enough,” said Francesco Divella a few days ago. , partner of Divella spa: “The cost of energy has had a frightening increase as have the costs of sea freight and so on. We are on the verge of zero profitability. This is why we are negotiating with large large-scale retailers to adjust prices but the counterpart is struggling to accept them. Now we are fighting for an increase of 20 cents per kilo but soon we will find ourselves forced to ask for another one ”.

A wall that is difficult to break down for large companies, let alone for smaller ones. “On the one hand”, explains Scordamaglia, “there is a part of the large-scale distribution that fears to see volumes and sales fall if prices increase, and therefore tries to preserve its margins. On the other hand, there are also operators who in a context of rising prices not only do not want to raise them themselves but push to lower them, through the use of flirtatious products to attract new customers “. Thus, says the councilor of Filiera Italia, a dangerous spiral is triggered, “which can lead to the disappearance of pieces of the national supply chain, just think that 88% of agri-food SMEs have fewer than ten employees, not to mention companies agricultural “.

The critical issues also concern one of the most representative products of Made in Italy such as wine, which has seen a 30% increase in cost. A “bill” for the sector of over one billion euros, which will soon force companies to review the price lists previously agreed with distributors and importers, said the Italian Wines Union (UIV) a few days ago. “The skyrocketing costs concern everything, from dry raw materials to the product, then from glass to labels, from cartons to bottle closures, from transport to electricity up to the average price of the wine itself, which thanks to a low-volume harvest goes up in several cases at + 40% compared to last year. A combination that, according to the secretary general, Paolo Castelletti “costs the sector even more than estimated only a month and a half ago: at present the additional ‘bill’ for the sector now exceeds one billion. It is quite clear – added the secretary of the association which represents 85% of Italian exports in the sector – that companies will soon be forced to review the price lists previously agreed with distributors and importers. A game whose consequences will not be easy to manage, because it risks crushing the weakest companies with the danger of generating a dangerous downward spiral ”.

A new rule will soon come to the rescue for Italian producers: from 15 December it will no longer be possible to impose excessively burdensome contractual conditions, such as the sale of agricultural and food products at prices below production costs. This is what the legislative decree implementing the European directive provides, which prohibits unfair practices in commercial relations in the agri-food chain, both between companies and in the marketing of agricultural products. 27 unfair commercial practices will be prohibited, including, in addition to the under-cost of production, the sales of agricultural and food products through the use of double-discounted electronic tenders and auctions, non-compliance with payment terms (no more than 30 days for perishable products), the imposition on the buyer by the supplier of products with expiry dates that are too short.

“Up to now we have tried to appeal so that certain things, certain critical issues that we deal with, even more so in this period of impressive cost increases, were understood. From mid-December we will have this new tool in combating unfair practices ”which will be able to mitigate the impact of expensive gas and avoid selling below cost. “But there is always the expensive energy and the logistical problems associated with bottlenecks. If the food supply chain is left alone, one becomes dependent on imports and consumers will buy lower quality products from other countries, moreover produced with less sustainable techniques than those used by us: according to the FAO to produce for example a kilo of beef in Italy one fifth of CO2 emissions are emitted compared to production in Asia or South America “.

“We are the second European manufacturer”, compared to energy costs “certain problems are heavier for us than for others”, said today the Minister of MiTe Roberto Cingolani. “There are states that pay 270 euros per magawatt hour and others pay less than half: there is objectively a strong discrepancy. Each of us has a problem, we need a compromise that allows everyone to make the transition in a sustainable way “. However, it is unthinkable to go forward at this rate: “There are three billion on the bills in operation and for now let’s go to the contingency but it cannot be mitigated every quarter for two or three years. So if it turns out that gas is structurally more expensive, we will have to work on other concepts that go into calculating the bill ”.

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