In a recent interview, Attila Vörös, the president of FÉSZ, a major Hungarian alliance of food sector companies, has stated that the food processing industries in the country will soon be hit hard by the shockwave of surging energy prices.
FÉSZ ('Alliance of Responsible Food Manufacturers') represents thirty-three business sectors within the food processing industry, many of whom will be affected, though not all of them equally.
As the price of energy is now skyrocketing, these industries will feel both direct and indirect effects. The price of fuel will, for example, affect their costs directly through increasing logistical expenditures, and some business branches, for whom energy (e.g. heating) is a major input factor, will see their costs increase even more drastically.
However, there are indirect effects too, and this is where the rising price of energy will add to the effect of other ongoing trends. First, some inputs, like labor, are already costlier. Second, commodity prices, for example, maize and wheat, are also rising. The increased input costs in the production of other commodities – the price of fertilizer, feed, and other components in plant cultivation and animal husbandry – will be transferred through commodity prices as the shock travels down the value chain.
Mr. Vörös also said that the food industry generally has a narrow, single-digit profit margin, and in this case, food companies do not have the reserves to soften the blow. Mr. Vörös added that various businesses in Hungary’s food processing industry will not be hit the same way, and the long-term solution for the crisis would be to increase energy efficiency and the share of renewable energy in the food industry.
For more information:
Ministry of agriculture, nature and food quality of the Netherlands