The hostilities in Eastern Europe may not directly affect the Philippines, but it would certainly have an impact on consumer prices. After Russia invaded Ukraine, analysts and experts warned that the conflict could worsen supply chain disruptions and push oil prices up, which will hurt consumers in Asia (See, “Oil’s war spike likely to hurt PHL, Thailand, India the worst in Asia,” in the BusinessMirror, February 26, 2022). The war zone in Eastern Europe may be thousands of miles away from the Philippines, but the fighting there is threatening to upend markets that are just starting to recover from the devastation caused by Covid-19.
The rebound in consumer spending coupled with the escalating Russia-Ukraine tensions are putting immense pressure on prices of key commodities. Right after Russia attacked Ukraine, the price of benchmark Brent crude jumped to more than $100 a barrel. The surge in wheat prices due to the disruption caused by the hostilities could make a number of basic food items, such as bread and meat products, more expensive (See, “Farm sector tracks Ukraine fallout,” in the BusinessMirror, February 28, 2022).
Even before Russia attacked its neighbor, the reopening of rich countries and the decline in Covid-19 cases have sent oil prices soaring due to strong demand. Because the Philippines imports its oil requirements, the rise in pump prices and the increase in fertilizer prices have become a twofold blow to local farmers and food producers. Sugar planters have warned that they might stay away from planting sugarcane due to skyrocketing production costs.
Aside from fertilizer, the crops that the Philippines does not produce, such as wheat and soybean, have also become costlier. Wheat, which is processed into flour, is grown in temperate countries like the United States, Ukraine, and Russia. Soybeans cannot be cultivated in the Philippines because it is a suitable crop in temperate regions.
Feed wheat and soybeans are two of the key ingredients used in manufacturing feeds for animals, like pigs and chicken. Russia and Ukraine are the world’s top sources of wheat; while Russia is a major exporter of ammonia, a basic building block for ammonium nitrate fertilizer. If the hostilities drag on, prices of fertilizer and animal feed materials could rise and eventually put pressure on the prices of basic commodities like pork and poultry.
This development does not bode well for the livestock and poultry subsector, which continues to grapple with diseases, such as African swine fever and avian influenza. In particular, rising production costs would deal a blow to the hog sector, which has yet to fully recover from the devastation caused by ASF. If they will not get any government help, hog raisers would be left with no other choice but to immediately pass on the increase in cost to consumers.
While the government can do nothing about the commodities affected by the war in Europe, it can provide assistance to planters of other feed materials like corn and coconut to ensure the stability of local feed supply. Apart from giving subsidies to farmers, government should also craft strategies that will enable them to reduce their production cost and improve their farms’ productivity. The stable supply of affordable raw materials produced in the Philippines will mitigate the risks posed by global events, such as wars and pandemics.