BAYER CEO PROVIDES UPDATE ON COMPANY'S ACTIVITIES IN UKRAINE AND RUSSIA
Mar. 25, 2022
Mr. Baumann, how has the war changed Bayer's situation in Ukraine?
The situation on the ground is dramatic. We utterly condemn this war of aggression against a free, democratic country; there is no justification for it. We are doing everything possible to support our colleagues, as well as farmers and patients as best as we can. We have about 700 employees in Ukraine, more than half of whom work in the agriculture business - in other words in the areas of seeds and crop protection. The other business is medicinal products. Seed production and distribution for the planting season in March and April are largely completed. Now there are import bottlenecks due to a lack of transport and logistics capacities. We have safeguarded the emergency supply of urgently needed medicines, which we are transporting to Ukraine with our own convoys.
How is Bayer supporting its Ukrainian employees?
We have given our employees in Ukraine additional financial support at very short notice and have safeguarded the continued payment of their salaries for the coming months. About 250 people including family members have since left the country, and we're now working on finding accommodation and support for them. The company and our workforce have also provided several million euros in humanitarian aid through various channels.
Bayer also has operations in Russia. Will you maintain your presence there?
We have significantly reduced our activities in Russia. We have suspended capital expenditures and advertising, but continue to supply the civilian population with medicines and to distribute seed and crop protection products. A discontinuation of those activities would massively impact patients and even more significantly disrupt food systems. For example, we continue to supply cancer drugs that patients in Russia depend upon and plan to maintain these logistics chains for ethical reasons.
How will the war impact the company's overall development?
It is difficult to fully assess that now. Our business in Ukraine accounts for less than one percent of Group sales, while Russia accounts for about two percent. We will be able to mitigate those business risks. Yet there are also secondary and tertiary effects particularly as regards energy supply and energy prices. For example, it is not clear to what extent gas will continue to be delivered from Russia. Bayer has become considerably less energy-intensive over the past ten years due to the transformation of our portfolio.
Russia and Ukraine are the breadbasket of Europe. Are the famine warnings justified?
The question isn't whether there will be a food crisis, it's how bad the crisis will be. We're already in the middle of a grain supply crisis. The situation was already strained due to the pandemic, weather phenomena and relatively weak harvests in Africa and Latin America, as evidenced by the rise in commodity prices. The war has dramatically exacerbated this situation. Far more people are affected by hunger today than two or three years ago. The scope of the crisis will worsen if governments and companies do not succeed in launching coordinated and concerted efforts.
Will there still be a significant harvest in Ukraine and will Russia continue to export grain?
We now have the same problem we had in fighting the pandemic. When the pandemic broke out, each government initially looked after national interests and suspended the export of masks and related equipment to some extent. Political interventions like these interrupted the logistics chains that were still working. We are now seeing a similar phenomenon. Some countries want to hold onto their grain reserves. In so doing, they are worsening the crisis rather than efficiently managing it through international cooperation at a global level. We are trying to ensure these mistakes aren't repeated.
Which regions are most heavily impacted by the grain shortage?
Prices will rise for us here in Europe, but for many others, particularly in North Africa and the Middle East, grain will become too expensive. People in those regions cannot afford to see the price of bread double or triple. This is a social time bomb. If food security is no longer guaranteed, that puts social peace at risk. There is a direct correlation between food scarcity and violence.
Yields per hectare are lower in organic farming than in conventional agriculture. Do the EU and Germany have to rethink their agricultural policy, which is currently geared toward "more organic"?
Sometimes scientific findings are still negated for ideological reasons. Yet it is also clear that we must not play one type of agriculture off against the other. What is certain is that food supply challenges can only be overcome through innovative solutions. The current scope of agricultural production for animal feed, food for human consumption and renewable raw materials already far exceeds our planet's regeneration capability. Now we are facing the additional problem that the number of people on Earth is forecast to increase to ten billion in the next 25 years. So we have to reduce our consumption of resources while feeding 25 percent more people. That can only be achieved through a sustainable intensification of agriculture, in other words by simultaneously reducing the amount of farmland while increasing crop yields. Organic farming tends to produce products that many people cannot afford.
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