When the war against Ukraine began, the grain market came under severe pressure. The prices exploded. How does it look today? The CEO of the largest German agricultural trader Baywa, Lutz, talks about the risk of future bottlenecks and reveals whether customers in the supermarket can breathe a sigh of relief.
When Russia invaded Ukraine a year ago, grain prices rose nearly 80 percent in just a few weeks. The fear of supply bottlenecks and food shortages spread. Concerns were also great at the Baywa conglomerate, the largest German agricultural trader.
The war caused 2022 crop yields in the region to be 17 percent below the previous year. In the meantime, however, the situation has eased – also because international agreements have meant that grain could be exported from Ukraine in several ways. “The market is saturated. We’re also seeing that in Europe at the moment,” says Baywa CEO Klaus Josef Lutz in the “Zero Hour” podcast. “The demand from the mills is rather reserved.”
Prices are no longer as high as they were at the beginning of the war, even if products such as wheat still cost significantly more than at the beginning of 2022. It is also questionable when and whether this will also be reflected in consumer prices, which had risen sharply in the past year. “We already have a massive inflationary issue,” says Lutz. “We have a clear reduction in real wages, a reduction in prosperity.”
In addition, there is always the danger that the crisis will worsen again if exports from Ukraine have to be stopped again. “The world market situation can change radically within a few days or weeks,” says Lutz. “The grain corridor only worked because the parties kept to it to some extent.”
Despite all the crises, 2022 was an extremely successful year for Baywa itself. The group, which is listed in the SDax, generated record sales of over 27 billion euros and also increased profits massively. “The markets played us into the cards,” says Lutz. “We are more resilient than we might have thought.” In order to be better prepared for crisis situations, the company is increasingly focusing on a broader range of products such as sesame or peas. “I think diversification is incredibly important in this business,” says Lutz. “If you only bet on wheat, the risk of incurring losses is insanely high.”
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