The latest turmoil in international grain markets brings back into focus not only the risk of rising flour prices, but also a much broader question for Cyprus.
To what extent is the country truly protected against a new food security crisis?
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At a time when the President of the Republic describes supporting the primary sector as an issue that “touches on the country’s security,” industry officials warn that international prices are rising again and, more importantly, that Cyprus still lacks strategic state reserves of grain for human consumption.
Are price hikes on the horizon?
George Kosies, Production Director at Cyprus Millers, speaking to Alphanews.live, describes a market facing a new set of challenges. Production, as he explains, may have remained at relatively good levels, but the crisis has now spread to transportation and supply chains.
The wars in Ukraine and the Middle East, problems at ports and along maritime routes, as well as the low water level of the Danube, have limited the available options for transporting grain to European ports.
According to him, Constanta, Romania—one of the key loading points for the European market—is of particular importance. A large portion of the grain arriving there is transported via the Danube from Central European countries. The river’s low water level, however, is now hampering cargo transport, adding yet another source of pressure to an already volatile market.
“All of this has increased both uncertainty and demand,” he emphasizes, as countries seek to bolster their reserves amid fears of new geopolitical turmoil. He explains that the stock market price of wheat is only the starting point. Added to this are the trader’s or country-of-origin premium, producer costs, loading and transportation costs, and, finally, freight charges to Cyprus.
“Whereas prices would normally be around 180–190 euros,” he notes, “current conditions can add tens of euros per metric ton.” As he explains, companies have tried in recent months to absorb part of the cost and expected that prices would fall once the harvest was completed in European countries. “But instead of falling, as we would normally expect, they’re rising,” he notes.
Unless the situation improves dramatically, Mr. Kosies estimates that flour prices will rise within the next two to three months. According to his estimate, the increase could be as high as nearly 10%, with companies trying to limit the percentage as much as possible. He notes that Greece has already seen bread prices rise by about 10%.
Strategic planning is on the horizon
However, beyond the immediate pressure on prices, he raises an issue that touches on the country’s very planning in the event of a crisis. “Cyprus has no strategic reserves,” he states, clarifying that the reserves currently in place are commercial and belong to private companies.
Mills, as he explains, maintain their own reserves so they can continue to supply the market in the event of a ship’s delay or other problem. However, this entails significant costs and business risk. “We are companies; we maintain these stocks for ourselves, but we pay dearly for them,” he emphasizes, adding that businesses are forced to maintain larger quantities because there is no state strategic reserve to back them up that could serve as a safety net.
According to him, a proposal to create such a mechanism has already been submitted to the Ministry of Agriculture years ago. The philosophy behind the plan is for the government to purchase the wheat and retain ownership of the reserve, while storage and replenishment would take place at the companies’ facilities for a small fee, so that the quantities can be made available immediately when needed.
“Cyprus must finally build up strategic reserves,” he says, noting that such a capability is not limited to the possibility of war. A disruption in maritime transport, a problem in the Bosphorus, ship delays, or another international crisis could create a supply problem. He even considers it paradoxical that there are strategic reserves for livestock feed but no corresponding reserves for human consumption.
The issue takes on added significance following remarks by the President of the Republic, who, speaking last Monday at a dinner hosted by the Pan-Cyprian Grain Producers’ Organization, directly linked the primary sector to the country’s security, noting that for an island nation, remote from the center of Europe, the existence of a strong domestic production base is a matter of food security.
Read more: Christodoulides announced new €2.5 million packages for agricultural diesel, fertilizers, and supplies
Nikos Christodoulides also announced two new programs totaling 1.5 million euros to address the increased cost of agricultural diesel and fertilizers, while listing a series of subsidies that have been provided to the sector in recent years. He noted, among other things, that since 2019 the broader grain sector has paid contributions totaling approximately 9.5 million euros, while state subsidies amounted to approximately 35 million euros.
The President also acknowledged that there is “an issue with stocks” this year, but referred to the matter of marketing the harvest and efforts to identify demand in countries in the region. This is a different issue from the one raised by the industry regarding the creation of a permanent government strategic stockpile for times of crisis.
Moreover, the discussion is taking place in a sector that was out on the streets just last semester. The Pan-Cyprian Grain Producers’ Organization had staged tractor protests, warning that Cypriot farmers face long-standing problems that undermine their productivity, their competitiveness, and their sustainability, while also expressing serious concern about the future of direct payments under the new CAP.
A few months later, the government stated that it considers the primary sector critical to the country’s security and announced new subsidies. At the same time, however, new international upheavals have reignited the question that goes beyond mere increases and concerns whether Cyprus is prepared in the event of yet another serious disruption to grain imports.
