How the Russia-Ukraine battle will affect agriculture imports and exports

SA’s imports of wheat, maize and fertiliser and exports of citrus products will be impaired by the global flare-up: Wandile Sihlobo of the Agricultural Business Chamber of SA.

SIMON BROWN: I’m chatting now with Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa. Wandile, as always I appreciate the early morning time. One of the things which I think has been missed, perhaps, by a lot of people in this war in Europe, Russia and Ukraine, is that both of those markets are actually fairly significant agricultural zones with wheat and maize most notably, and actually a lot of that is being exported into Africa. There are going to be implications as supply chains and the like start to struggle getting that wheat and maize out of those two regions.

WANDILE SIHLOBO: Yeah. Thanks for having me on, Simon. Indeed. [There are] two ways though, Simon. The first point is, as you put it, you have roughly 24% or more of wheat globally on the exports coming from those markets, and the African continent – particularly north Africa and part of East Africa – is even reliant more on the physical supply there.

But I think their first channel of that is through the price implications that we are already seeing, which is the upsurge of grain prices as well as the vegetable oil because, Simon, you will know also [that] just under 60% or so of global sunflower oil is coming from both of those countries. So really big players in the grain, big players in barley markets, big players also in maize insofar as about 14% or so of global maize exports come from there; barley also just under 60%.

But the other way of thinking about it, Simon, particularly if you are looking at it from a South Africa perspective, is we have about 7% of our citrus products exported to Russia. We also have around 12% of our apples and pears exported to Russia. So for the fruit side, yes, you could see downward pressure – at least in the near term – on those products as we look for other markets to which we can switch those exports, especially citrus, as we are heading right towards the harvest period within a month or two.

SIMON BROWN: I take the point. There are two key points here. The one, which you’ve explained to me in the past, is that sense that pricing is fairly global. We might be sitting here in southern Africa and think but we are not eating Russian maize. We are probably not, but there is that global pricing. In terms of the citrus is it potentially viable for these farmers to, at such short notice, suddenly find new markets? If they do, are they going to take perhaps a bit of a price hit because there is just a slice of demand removed from the market, which is Russia.

WANDILE SIHLOBO: Absolutely. That’s the current scene now with the industry players. We’re speaking with various farmers, we’re speaking with various exporters, and the fear is there to say, are we going to be able to find another market that can absorb these products? We must appreciate the fact that these projects were going to Russia because other markets that we are already exporting to were relatively saturated because we are not the only one actually producing the citrus products. That’s the worry.

But I might say, though, for the folks in apples and pears, we’ve just passed the peak season of the exports. So it’s better for [them], even though they will take a knock. The major worry is on the citrus side – to ask where that will be. Our sense is that there might be some price pressures within the domestic market.

SIMON BROWN: A quick last question while I’ve got you in the line. One of the challenges – actually many challenges, obviously diesel is a major input cost – is fertiliser. Has there been any impact to what have already been elevated prices for fertiliser?

WANDILE SIHLOBO: It’s another upside risk, Simon, as you rightly put it. You will remember that Russia is the top exporter, is a world-leading exporter of fertiliser, accounting for about 14% of global exports. So, with all that is happening, I think it will depend on how long the war will last and the severity of it. But the fact that the payment system is an issue means that you can expect further upside risk within the fertiliser space, and that is going to be a big issue for the folks that are in the winter-crop growing area of South Africa who start planting around April, which means they should be putting their orders now, heading towards the end of the month, for fertilisers.

SIMON BROWN: We’ll leave it there. That’s Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa. As always, I appreciate the early morning insights.

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