Farmers are looking for new markets for the millions of cartons of citrus fruits, pears and prunes that they export to Ukraine and Russia, to mitigate possible financial losses as a result of the conflict between the two countries.
It has been six weeks since Russia invaded Ukraine, resulting in millions of people fleeing the country while thousands have been killed. Sanctions have since been imposed against Russia and trade has halted in a number of industries.
SA exports 11-million cartons of citrus fruits to Russia and Ukraine and 5-million cartons of pears and prunes to Russia annually.
Those exports have “obviously now been compromised” as a result of the war, said Agri SA executive director Christo van der Rheede. “The big job is to find new markets for these products.”
Van der Rheede said it was “difficult to quantify the losses at this point ... farmers are busy finding new markets and their focus is to mitigate possible risks in terms of possible losses”.
As the citrus export season kicks off this month, the Citrus Growers’ Association of Southern Africa (CGA) said the industry would continue to see steady growth across most citrus varietals, with an estimated 4% growth in exports.
In the coming season it will target the US and India, as both offer major expansion potential.
“This is the only way the growers will be able to offset increasing input costs that are squeezing their profit margins and for the industry to remain competitive, particularly considering local production is expected to grow by another 300,000 tonnes over the next two years,” said Justin Chadwick, CEO of the association.
The big job is to find new markets for these products
— Agri SA executive director Christo van der Rheede
Wandile Sihlobo, chief economist at the Agricultural Business Chamber of SA, said South African farmers and agribusinesses have long identified key new markets to prioritise.
They include Japan, Bangladesh, China, India and Saudi Arabia, based on their populations and the potential increase in demand, he said. India, Saudi Arabia and Japan are among the top 20 importers of agricultural products globally.
“Of the three countries, Saudi Arabia is one of the countries where South Africa's agricultural sector currently has minimal access,” he said.
Russia and Ukraine are also key exporters of energy and metals, and agricultural products such as cereals and fertilisers.
Sihlobo said in 2021 the two countries together accounted for nearly 30% of global wheat exports, about 14% of global maize exports, roughly 32% of global barley exports, almost 60% of global sunflower oil exports, and about 14% of global fertiliser exports.
With 80% of SA's fertiliser imported, Van der Rheede said that also “presents risk because we have now seen with the war how it can easily lead to price shock and shortage. Companies that are importing [fertiliser] are doing well to mitigate any shortage.”
Fertiliser prices were already elevated due to supply chain constraints caused by the Covid pandemic, and the war in Ukraine was pushing them even higher. Since the beginning of the year prices have reportedly risen by as much as 30%.
The local agriculture industry, which Van der Rheede describes as being in a “good state” as it was declared as an essential service during the hard lockdown, is facing rising input costs that are leading to some food price increases.
These costs are putting pressure on farmers who “barely make profit on their products”, he said.
Besides higher fertiliser prices, there have been increases in the cost of fuel and herbicides.
There has also been a steep increase in the price of sunflower oil in recent weeks due to supply shortages.
Van der Rheede said that while the country imports a lot of sunflower oil from Ukraine, “We have 900,000 tonnes of sunflower on the land, and it's important to protect the sunflower crop. We can't afford a further spread of locusts, because if we compromise our own crop you can imagine what the impact will be on the price.”
There have been locust outbreaks in some parts of the Northern Cape, Eastern Cape and Western Cape. It has been reported that as many as 33 farms in the Northern Cape have been affected.
Van der Rheede said the industry is working closely with the department of agriculture to ward off further spread.
Tom Wilson, head of emerging market equities at investment group Schroders, said food prices are a particular concern as Ukraine is a significant grower and exporter of wheat and other agricultural commodities.
The sowing season is being disrupted and there are concerns for winter wheat, where a deficit of fuel and fertiliser may lead to a decline in yields.
“The extent to which higher prices will persist remains unclear,” Wilson said. The impact on food prices might be sustained if the Ukrainian planting and growing season is broadly disrupted and if there is significant interruption to the global supply of fertilisers.
Van der Rheede expects commodities such as maize to do well this year.
“Summer grains are also in good shape and we expect good yield. We also expect the winter grain crop to do well because of good rains in the Western Cape. Other export crops in deciduous and citrus, and macadamia, pecan as well as ground nuts, will have good markets internationally.”
This week Agri SA released a report showing the impact of deteriorating road infrastructure on the sector. It said participating farmers relied on road transportation to move an average of 94% of their produce.
Of those surveyed, 13% relied on road transport weekly while 87% relied on roads daily. “This explains why 69% of the respondents had at some point attempted to fix affected roads themselves,” Agri SA said in a statement.
The respondents on average incurred repair and other related costs of more than R200,000 each. “While this may be affordable for the biggest sector players, it is untenable for South Africa’s small-scale farmers,” Agri SA said.
Van der Rheede said the industry hopes the government will intensify the improvement of infrastructure.
Agri SA is already in talks with Transnet, which plans to sell slots on its rail network to private companies that use its infrastructure to move goods.
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