Russia is among the main gamers in international agricultural markets. The nation is a major exporter of grains, and in addition built-in into international agriculture as a provider of inputs, significantly fertiliser. The nation is a number one world provider of the important thing substances of a variety of them.
It’s due to this fact vital to maintain monitor of the impression of Russia’s invasion of the Ukraine on varied transmission channels, and the knock on results they might have on Africa’s agricultural markets.
Thus far the main focus has been on the provision and value of grains and oilseeds. The battle presents upside dangers to each as a result of Russia and the Ukraine make vital contributions to international exports of wheat, maize and sunflower oil.
There are additionally dangers for international locations that export to Russia. Globally the nation is the thirteenth largest agricultural merchandise importer in worth phrases. The important thing merchandise Russia imports embody citrus, cheese, bananas, wines, soybeans, apples, pears, beef and palm oil. These are primarily sourced from a variety of nations comparable to Belarus, Turkey, Brazil, Germany, China, Ecuador, Italy, Indonesia, France and Germany.
Within the case of South Africa, Russia accounted for 7% of its citrus exports in worth phrases in 2020. And it’s South Africa’s second-largest marketplace for apple and pear exports.
However there’s an incredible deal extra at play. Russia is the world’s main exporter of fertiliser supplies in worth phrases, adopted by China, Canada, the US, Morocco and Belarus. These fertiliser mixtures embody minerals or chemical compounds starting from nitrogen to phosphourous and potassium.
Fertiliser constitutes a major share within the development of agricultural commodities and crops the world over, and in addition substantial share of enter prices.
In South Africa, fertilisers account for about 35% of grain farmers’ enter prices in South Africa.
As with the grains and oilseeds market, the precise disruption of export exercise is but to unfold. However the in depth sanctions that Western international locations have imposed on Moscow, together with the settlement to exclude some Russian banks from some international fee techniques comparable to SWIFT, might negatively have an effect on Russia’s buying and selling actions.
This disruption might push fertiliser costs even increased than the spike skilled prior to now 18 months. In some circumstances, for instance in ammonia, costs rose by 260% between December 2020 and December 2021. This meant that farmers needed to soak up substantial prices for the 2021/2022 crop the world over. The widely increased commodity costs, particularly grains and oilseeds, supplied monetary flexibility to soak up a few of these prices, however not totally. The Russia-Ukraine battle will now be an added upside danger on costs for farmers.
For customers, the knock on results will usually be via the dimensions of the ultimate harvest of the crop. Farmers are value takers, and may due to this fact not essentially move on the enter prices to customers.
Fertiliser value dynamics
Fertiliser costs elevated sharply in 2021 and remained elevated this yr.
For example, in January 2022, the worldwide costs of a variety of key fertiliser substances shot via the roof. Since January 2021 the value of ammonia has gone up by 220%, urea by 148%, di-ammonium phosphate by 90%, and potassium chloride by 198%.
A variety of things have been behind these sharp enter price will increase. These embody provide constraints in essential fertiliser-producing international locations comparable to China, India, the US, Russia and Canada. Rising delivery prices, and excessive oil and gasoline costs have additionally been contributing components, together with firmer international demand from agriculture produces.
The Russia-Ukraine battle will add to those value pressures, significantly if Russia’s exports endure because of the battle and sanctions. The first markets for Russia’s fertiliser materials are Brazil, Estonia, China, India, the US, Finland, Mexico, Poland, Romania, and Latvia.
Even international locations with small direct fertiliser imports from Russia, comparable to South Africa – Russia’s thirty sixth largest fertiliser supplies market – will really feel the value pressures.
This week the US Secretary of Agriculture, Tom Vilsack, stated it was too early to know if the battle in Ukraine would disrupt worldwide fertiliser commerce. However he warned corporations towards taking “unfair benefit” of the present circumstances by artificially inflating costs.
Africa’s fertiliser utilization
Nations in sub-Saharan Africa are small customers of fertiliser in contrast with different areas of the world. Consumption is estimated at 19,9 kilograms of vitamins per hectare of cropland, which is properly beneath the 128,7 kilograms of vitamins per hectare of cropland in developed international locations such because the US.
This low use of fertiliser has partly contributed to typically decrease agricultural productiveness within the area.
There are quite a few causes for this low use of fertiliser, together with affordability points for the continent’s smallholder farmers. The present costs ranges have exacerbated the issue. This might hold productiveness ranges low for the foreseeable future.
However the image isn’t uniform. Nations comparable to South Africa are main fertiliser customers, with a mean of 72,8 kilograms of vitamins per hectare of cropland in comparison with the regional common of 19,9 kilograms.
Zambia can also be an vital fertiliser consumer, consuming 52,5 kilograms of vitamins per hectare. Kenya and Nigeria are smaller fertiliser customers. Consumption for each is lower than 30 kilograms of vitamins per hectare.
The longer view
It has usually been argued that Africa wants to enhance its agricultural productiveness to enhance its meals safety. However for this to occur there must be a financially conducive manufacturing surroundings. As issues stand, the price of inputs like fertiliser don’t augur properly for the realisation of improved agricultural productiveness on the continent.
This can be a international problem for all farmers, and sadly, the last word crop yields that farmers harvest depends on using fertilisers. A discount in fertiliser use, and the ensuing destructive impression on yields, has implications for the customers the world over, significantly in poor international locations the place agriculture constitutes a major share of the economic system.