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Why meat prices in Spain will rise if the war in Ukraine continues

Rising cereal prices caused by the war in Ukraine are having a knock-on effect on meat prices in Spain, and things could get worse if the war continues.

La Boqueria market in Barcelona, Spain in 2017.
La Boqueria market in Barcelona, Spain in 2017. Photo: Z S/Unsplash.

You might not have known that cereals are key to the meat industry, but you may have noticed meat and poultry prices rising on supermarket shelves. The feed eaten by animals, such as pigs, is usually made up of around 20 percent corn, and the rise in cereal prices is now affecting the rest of the food chain, and meat prices in Spain in particular.

Experts are now warning that prices could continue to rise if the war in Ukraine continues. This is because Russia is the world’s main producer of grain crops, a key ingredient in many animal feeds. A continuation of the war could therefore lead to further price increases that could indirectly affect all animal products such as ham, eggs, and milk.

READ MORE: Products that are more expensive than ever due to the war in Ukraine

Meat prices in Spain were rising even before the outbreak of war in Ukraine, and have climbed by 18 percent in the last year. 

The added economic shock of war, though, has caused meat prices to spike: beef prices, for example, have risen by almost 1 percent a week since March.

Jesús, a livestock owner, explained to Spanish outlet La Sexta that feeding his animals accounts for around 80 percent of the cost of production for his business, therefore, if cereal prices continue to climb, so will the price of his product.

This extra cost will then be passed on to consumers in supermarkets. “The [price of the] shopping cart is going up and it is logical, there is no other way to do it, products are going to be much more expensive,” he said.

The conflict-induced price spikes come amid tough economic times in Spain, not only because the country is still recovering from the COVID-19 pandemic, but also because Spaniards have been feeling the pinch of inflation in the last year. 

READ MORE: Products made more expensive than ever due to inflation

Last October, electricity bills were sixty-three percent higher than the previous year, according to statistics from Spain’s Instituto Nacional de Estadística (INE). Spain’s Consumer Price Index (CPI) ended 2021 at 6.5 percent – fractionally lower than forecast but still the highest level in almost thirty years.

According to a recent survey by the Bank of Spain, 60 percent of national companies plan to raise their prices in the coming year. 

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ECONOMY

‘No longer black sheep’: Tourism boosts Spain and other ‘Club Med’ economies

Derided as "Club Med" nations during the European debt crisis 15 years ago, the economies of Spain, Greece and Portugal are now outperforming their northern peers thanks to a rebound in tourism.

'No longer black sheep': Tourism boosts Spain and other 'Club Med' economies

The three nations had to endure harsh austerity measures in the early 2010s imposed by their European Union partners, who were quick to blame their fiscal laxity and lack of competitiveness for their economic woes.

But “the situation has changed” since the Covid-19 pandemic ended, said Zsolt Darvas, an economist at Bruegel, a Brussels-based think tank.

“Today, those countries are growing faster than the European Union average, they are no longer seen as black sheep.”

Spain’s gross domestic product (GDP) expanded by 2.5 percent last year, while Portugal’s economy grew by 2.3 percent and Greece by 2.0 percent.

That compares to growth of 0.4 percent for the entire 27-member European Union, which was weighed down by Germany’s 0.3 percent contraction, making it the world’s worst-performing major economy in 2023.

The International Monetary Fund expects the three nations to continue to outperform this year, although at a more modest pace.

It sees growth this year of 2.4 percent in Spain, 1.7 percent in Portugal and 2.0 percent in Greece.

Spain’s economy is taking off “like a rocket”, Spanish Prime Minister Pedro Sánchez said recently. The country is “the locomotive” of job creation in the EU, he added on Thursday.

READ ALSO: Spain’s economy grew an unexpected 2.5 percent in 2023

‘Great efforts’

Economists say this turnaround is largely due to a strong rebound in tourism, which reached record levels last year following the lifting of pandemic travel restrictions.

The sector is key for the three nations, accounting for almost 25 percent of Greece’s economy, and 12 percent in both Portugal and Spain.

READ ALSO: 84 million – Spain welcomed record number of tourists in 2023

The trio of nations are also benefiting from the EU’s massive pandemic recovery fund, whose mix of grants and loans in exchange for structural reforms will largely go to southern countries.

Spain – the biggest beneficiary of the fund after Italy – has so far received €38 billion, Greece €15 billion and Portugal €8 billion.

The three nations have also made “great efforts to improve their economic attractiveness” with structural reforms that have boosted their competitiveness and improved their labour markets, said Darvas.

The reforms have helped draw foreign investment, especially in renewable energy and cloud computing.

Amazon’s cloud computing division AWS announced last month it would invest over €15 billion to expand its data centres in Spain.

READ MORE: Amazon to create 17,500 new jobs in Spain

Many automakers such as Volkswagen and Stellantis, whose brands include Peugeot, Fiat and Jeep, have chosen to assemble their new electric vehicles in Spain, Europe’s second largest automobile producer after Germany.

Challenges remain

The growth spurt in the three countries, however, is partly catching up after the steep falls in GDP during the financial crisis. Greece’s GDP for example plunged 25 percent.

Economists warn they still face challenges.

While they have all seen joblessness fall, the unemployment rate in Greece and Spain sits above 11 percent, way above the EU average of 5.9 percent.

And former European economic and monetary affairs commissioner Olli Rehn told AFP that “deficits and debt levels remain large in some cases” even though “divergences between euro area countries have decreased compared to 10 years ago”.

Portugal swung to a budget surplus of 1.2 percent of GDP last year while Greece’s public deficit declined to 1.6 percent in 2023 from 2.5 percent in the previous year. The EU average is 3.5 percent.

This has helped its 10-year borrowing rate to drop to 3.5 percent from 13 percent during the financial crisis.

Darvas said the “convergence” of southern European nations with northern ones “is likely to continue” but at a “slower pace”. Spain, Portugal and Greece still have “work to do,” he added.

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