Companies are fighting for survival: “Putin will not decide who bakes bread rolls here”

Benjamin Meise was lucky. The 42-year-old farmer has signed a three-year contract with his electricity provider, which also extends beyond the end of the year.

Unlike many of his colleagues, the dairy farmer from Buchholz in Brandenburg does not have to reckon with an increase in electricity prices, which threatens to further aggravate the precarious situation of many farms. But even so, he says, “It’s difficult to remain optimistic these days.”

It’s not just the high electricity prices that have been causing problems for farmers since the start of the Ukraine war. Fuel, gas, fertilizer – everything has become more expensive. Animal feed prices have also risen. This meant that the direct marketer Meise had to pass on the cost pressure to customers in the form of higher prices.

Albert Stegemann (CDU), the agricultural policy spokesman for the Union faction, expects further price increases for food in the coming months. “We must therefore increase the supply of food in a resource-efficient manner,” he told the Tagesspiegel.

Agriculture Minister Cem Özdemir (Greens) must “finally break away from green ideologies and give priority to food security,” he demanded. Now is not “the time for blanket bans on pesticides, the reduction of animal husbandry and national solo efforts”.

In addition to farmers, the entire food industry is suffering from high energy prices. Bakeries, meat processors, mills and dairy companies are among the businesses struggling with gas and electricity tariffs.

The situation is calmed by the fact that a so-called gas shortage, in which not all companies can be supplied with the raw material as before, is not to be feared as things stand at present. In any case, Özdemir has already made it clear that the food industry is systemically important and therefore does not have to expect cuts in gas supplies.

Bakeries suffer from inflation

Nevertheless, the minister recently felt the concerns of the food industry when he invited their representatives to the ministry, including the Central Association of the German Bakery Trade. For a number of bakeries that heat their ovens with gas, energy costs have tripled since the start of the Ukraine war.

Therefore, the draft of the hardship regulation planned by the traffic light coalition does not go far enough for the representatives of the bakers’ association. The planned regulation, according to which additional aid beyond the gas and electricity price brake can only be expected if energy prices quadruple, is tantamount to a “catastrophe” for some companies, according to the Central Association.

Putin will not decide who bakes rolls and who doesn’t.

Cem Özdemir, Minister of Agriculture

Russian President Vladimir Putin will “not decide who bakes rolls with us and who doesn’t,” Özdemir told the Tagesspiegel. The gas and electricity price brake, from which the food trade also benefits, also serves to “not have to pass on all cost increases to customers,” he said.

“Consistently converting energy supply to renewables”

However, honesty also means “that no aid package can undo the consequences of the war”. It is therefore right “that we make ourselves independent of Russian gas and consistently convert our energy supply to renewable energies,” said the Green politician.

For bakeries that do not have a comfortable three-year contract for gas or electricity supply and have to reckon with another significant price hike at the turn of the year when their contracts are changed, it is now a matter of sheer survival. Such family businesses are often left with no choice but to pass on rising gas costs to customers – or to go bankrupt.

“Inflation rate should not rise any further”

Jan-Christopher Scherer from the German Institute for Economic Research (DIW) does not assume that food prices will rise again like last spring. Nevertheless, according to his assessment, at the turn of the year producers will pass on some of their increased energy costs to consumers due to the frequent adjustments to their energy contracts, especially electricity and gas.

“The inflation rate is not likely to rise any further, but it will remain at its current high level for some time and will only drop over the course of the year,” is Scherer’s forecast. With regard to the high energy costs, which are one of the drivers of inflation, the expert now sees a slight stabilization in view of the electricity and gas price brakes.

“These measures limit possible cost increases in the future and have thereby significantly reduced the uncertainty about further price developments both among companies and consumers,” said Scherer.

Peter Feller, the deputy general manager of the Federal Association of the German Food Industry (BVE), refers to a survey carried out among member companies in October in view of the difficult situation in the industry.

Accordingly, 47 percent of the companies had stated that they were threatened with insolvency if there were no relief. “The relief in gas and electricity prices must come as soon as possible,” is Feller’s verdict.

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