Agro sector caught in Russo-Ukraine crossfire


Agricultural Business Chamber Chief Economist, Wandile Sihlobo

DURBAN, (CAJ News)AFRICA’S agriculture markets are forecast to bear the brunt of the escalating war between Russia and Ukraine.

According to an economist, the war presents upside risks to some sub-sectors because the two warring countries make significant contributions to global exports of wheat, maize and sunflower oil.

Wandile Sihlobo, the Agricultural Business Chamber (Agbiz) chief economist, pointed out Russia, the alleged aggressor, was one of the major players in global agricultural markets.

President Vladimir Putin’s Russia is a significant exporter of grains and is also integrated into global agriculture as a supplier of inputs, particularly fertiliser.

“It’s therefore important to keep track of the impact of Russia’s invasion of Ukraine on various transmission channels, and the knock-on effects they could have on Africa’s agricultural markets,” Sihlobo said.

He noted so far the focus has been on the supply and price of grains and oil-seeds yet the war presents upside risks to Russia and Ukraine, which make significant contributions to global exports of wheat, maize and sunflower oil.

Risks are rife for countries that export to Russia, which is the 13th largest agricultural products importer in value terms.

Key products Russia imports from South Africa include citrus, cheese, bananas, wines, soybeans, apples, pears, beef and palm oil.

In the case of South Africa, Russia accounted for 7 percent of its citrus exports in value terms in 2020.

Russia is South Africa’s second-largest market for apple and pear exports.

Much of the talk on the war’s impact of agriculture has been on fertilizer.

Russia is the world’s leading exporter of fertiliser materials in value terms, followed by China, Canada, the United States (US), Morocco and Belarus.

Fertiliser constitutes a significant share in the growth of agricultural commodities and crops across the world, and also a substantial share of input costs.

In South Africa, fertilisers account for about 35 percent of grain farmers’ input costs.

Sihlobo said the extensive sanctions that Western countries have imposed on Moscow could negatively affect Russia’s trading activities and indirectly push fertiliser prices higher than the spike experienced in the past 18 months.

Since January 2021, the price of ammonia has gone up by 220 percent, urea by 148 percent, di-ammonium phosphate by 90 percent and potassium chloride by 198 percent.

“The Russia-Ukraine war will now be an added upside risk on prices for farmers.”

Fertiliser prices increased sharply in 2021 and remained elevated this year.

Supply constraints in critical fertiliser-producing countries, rising shipping costs and high oil and gas prices have been blamed.

Tom Vilsack, the United States Secretary of Agriculture, was quoted as saying it was too early to know if the war in Ukraine would disrupt international fertiliser trade.

He issued a warning to companies against cashing in on the upheavals by “artificially inflating prices.”

– CAJ News







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