A key government agency tasked with enhancing the viability of the agricultural sector has warned that the Russia-Ukraine war is likely to constrain the supply and availability of fertilisers in SA and will lead to a surge in food retail prices.
According to the National Agricultural Marketing Council (NAMC), the conflict is likely to cause trade tension in the black-sea corridor, a major trade and cargo transportation hub, which will limit the supply and availability of fertilisers in SA. This will affect all farmers as they rely on imported fertilisers to produce commodities including pastures for livestock. Fertilisers account for at least 35% of grain farmers’ input costs.
“The impact of fertiliser and fuel price hikes will be transmitted to food retail prices, thus impacting consumer prices in the short term,” the council’s Christo Joubert, Thabile Nkunjana, Ndiadivha Tempia and Sifiso Ntombela said in a joint report published Tuesday.
This will be a major blow for consumers already reeling from record-high fuel price increases.
Russia invaded Ukraine on February 24, saying the step was necessary for the “demilitarisation and denazification” of its neighbour and former Soviet republic.
The conflict has already caused hundreds of casualties, while hundreds of thousands have been displaced.
The authors of the NAMC report said the conflict presented a serious threat to SA’s winter and summer production for grains like wheat and barley. SA imports about 80% of its fertilisers and Russia is among the biggest exporter of plant food globally. Thus the conflict has implications not only for the availability of food but also threatens food production as some of the major inputs required to produce are imported from Russia.
“With the ongoing conflict, Russia might not be able to continue to export fertilisers globally [due] to logistical challenges inherent in the current war,” they said. This may have implications on the global fertiliser market with prices already at record levels. “It is also important to note that both countries are major players in oil and gas which are crucial for fertiliser production elsewhere in the world.”
Russia is estimated to contribute about 10% of the world’s oil gas supplies.
Ukraine and Russia are also major suppliers of the global key staple foods that the majority of South Africans consume daily. Together the two countries export more than 25% of the world’s wheat while Ukraine alone exports more than 15% of the world’s barley, close to 15% of the world’s maize, and 40% of the world sunflower oil.
For the 2021/2022 season, SA is estimated to import 1.47-million tonnes of wheat of which 495,062 tonnes have been imported so far. The imports originated from Lithuania which accounted for 47%, Poland at 18%, Argentina at 15%, Latvia at 10%, Australia at 8% and the US at 2%. The NAMC report highlighted that while SA was not necessarily buying wheat from Russia and Ukraine now, prices elsewhere were more than likely to increase, given that the two protagonists were major players in the global wheat market.
SA has imported about 30% of its wheat from these two countries in recent years.
According to the latest NAMC supply-demand estimate report, SA has a wheat reserve that can last 67 days and maize reserves that amount to 88 days.
“This is sufficient time to ensure SA identifies alternative suppliers should the conflict in Russia-Ukraine persist longer,” the report’s authors said.
Western Cape agriculture MEC Ivan Meyer said he had met key players in the agricultural industry on Monday to discuss the challenges afflicting the sector. Prices of primary agricultural inputs in SA are already up more than 100% compared to January 2021, Meyer noted.
“The Russian and Ukraine markets contribute to SA’s foreign income derived from exports of agricultural products, with a significant share of these products coming from the Western Cape,” Meyer said, adding that the province was looking at various ways to assist the sector.
“Given that market access is an apex priority for the Western Cape, the agricultural sector will explore the market opportunities offered through the African Continental Free Trade Area agreement as a viable option to offset the potential negative impact of the Russian attack on Ukraine,” Meyer said.
SA’s agricultural exports to Russia and Ukraine combined were valued at R4.1bn in 2020.
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