“Contrary to my projections, as I used to have, [elas] are very, very reserved and I will keep them very reserved, because I am not exactly sure of the impacts of inflation “on the functioning of the group and in general, admitted this Thursday Pedro Soares dos saintsduring a press conference with journalists, scheduled for 2021 consolidated results.
In this context, Pedro Soares dos Santos, who has worked for the Jerónimo Martins group since 1983 – two years before the launch of the Pingo Doce channel – who has been a director of the company since 1995 – the year Biedronka joined the group – , and who has headed the company’s executive committee since 2010, we didn’t want to dwell too much on the outlook for 2022.
“I know that in the part of all that is merchandise [neste caso matérias-primas agrícolas transaccionáveis nos mercados internacionais], inflation is much higher than anything being said in the market right now – when you think the market has 10% inflation, when you look at grains it has 40% to 50% and all the he impact that this has on the food chain is then very wide,” said the general manager and president of Jerónimo Martins SGPS. “The reserve I have is very important, there is too much uncertainty and I prefer to be very careful in this matter”, he concluded, in response to the question on billing forecasts in a context of inflation and loss of real purchasing power in 2022.
The president of the group, which operates in distribution and invests in food production in recent years, warned: “There will be madness in the attempt to raise prices and that we will have a big fight to fight”. But there are limits, he acknowledged.
“What we, Jerónimo Martins, are going to try to absorb and we’re going to try to pass on… We’re not going to keep everything,” he said, referring to the retailer’s ability to absorb the price increase. paid to producers and to what extent this impact can be passed on to end consumers. That, he said, “is going to be the big exercise for the next four or five weeks.”
JM “is ready to mitigate and be able to balance what it can pass on to the consumer and what it will need to absorb [ela própria] even if it implies a revision, perhaps, of a certain profitability,” said Pedro Soares dos Santos. “And it has to do, really, with what’s going to happen over the next four weeks in cost increases,” he reiterated. “For example,” argued the JM chairman, “oil has gone up 60% – that’s a brutal impact on the lives of families.”
Milk, meat, eggs, pasta and oils: JM sees prices rising
With 465 Pingo Doce supermarkets and 42 pay and carry Recheio (and 460 stores of the Amanhecer chain) in Portugal; 3,250 Biedronka units and 291 Hebe parapharmacies in Poland; and 819 Ara convenience stores in Colombia, JM sees “equal pressure” on inflation in the three markets where it operates, the group’s chairman said.
“Oils and flour”, with increases “of 40%” in Colombia, he said, following the rest of the evolution that he estimates to be the same in the rest of Latin America, make also part of the list that Isabel Pinto gave, minutes later, during the same press conference, when asked about the targets most sensitive to food pressure in the short term. The general manager of Pingo Doce since 2015 admitted to reporters that “the increase in cereals is by far the most important”.
“Last year there was already a great inflation of all products that depend directly or indirectly on cereals”, he contextualized. But Isabel Pinto explained that “the reasons for last year were different”, which “do not have to do with the war in Ukraine”, but with “the replacement of the actions by China [cujo tamanho do mercado de consumo faz com que o impacto na procura e oferta seja global a cada vez que há alteração]”. Two years ago, China was experiencing “a pig crisis”, he said, looking in 2020 for “live, non-feed animals” consisting of grain. But last year, it resumed its purchases of animal feed, “which increased demand”, amid supply conditions penalized by the drought in South America, he added.
“The war [na Ucrânia] started two weeks ago, we have started to receive an increase in this type of product again,” acknowledged Isabel Pinto. But “we still don’t know – we are still in negotiation processes – of course what the end of the increase will be,” he said. “What we know is that these are in fact large increases, which will mainly affect pasta, oils and animal feed, which have an impact on everything that comes from the animal. [gado e aves]namely milk, meat and eggs”.
In February, the FAO assessed a week ago, before Russia invaded Ukraine, that food prices commanded by the United Nations Food and Agriculture Organization’s index agriculture were up to 26 years old, since the creation of the weighted indicator of the prices of five agricultural raw materials and commodities traded on international markets (meat, dairy products, cereals, vegetable oils and sugar). And the main reason, at the start of the year, for the FAO food price index jumped 24.1% compared to February 2021, when it was already at its highest since 2014 (and still in a pandemic year, it must be remembered) it was not even cereals, but vegetable oils – which enter the food chain directly, with the consumer, and indirectly through various agro-food industries.
“The sharp increase in the vegetable oil price index, the organization explained on March 4, “is mainly due to strong global import demand, as well as some supply-side factors,” where the FAO includes the limited supply of palm oil export product from Indonesia, “the world’s largest exporter”, “weaker prospects for soybean production in South America”, and “fears of drop in sunflower oil exports due to disruptions in South America’s Black Sea region, where the conflict between Russia and Ukraine is currently unfolding.
A situation that has worsened since closure of Ukrainian ports to international tradeKiev’s decision to suspend imports due to food security in the invaded country since February 24 and since EU, US and UK retaliatory sanctions on the Russian economy.