Russia is without doubt one of the main gamers in world agricultural markets. The nation is a big exporter of grains, and likewise built-in into world agriculture as a provider of inputs, significantly fertiliser. The nation is a number one world provider of the important thing elements of a variety of them.
It’s due to this fact necessary to maintain observe 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.
Up to now the main target has been on the provision and worth of grains and oilseeds. The conflict presents upside dangers to each as a result of Russia and the Ukraine make important contributions to world 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 embrace citrus, cheese, bananas, wines, soybeans, apples, pears, beef and palm oil. These are primarily sourced from a variety of nations reminiscent of 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 a terrific 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 embrace minerals or chemical substances starting from nitrogen to phosphourous and potassium.
Fertiliser constitutes a big share within the development of agricultural commodities and crops internationally, and likewise 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 world cost techniques reminiscent of SWIFT, might negatively have an effect on Russia’s buying and selling actions.
This disruption might push fertiliser costs even larger 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 internationally. The commonly larger commodity costs, particularly grains and oilseeds, offered monetary flexibility to soak up a few of these prices, however not absolutely. The Russia-Ukraine conflict will now be an added upside danger on costs for farmers.
For customers, the knock on results will sometimes be by means of the scale of the ultimate harvest of the crop. Farmers are worth takers, and would possibly due to this fact not essentially cross on the enter prices to customers.
Fertiliser worth dynamics
Fertiliser costs elevated sharply in 2021 and remained elevated this 12 months.
As an example, in January 2022, the worldwide costs of a variety of key fertiliser elements shot by means of 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 embrace provide constraints in crucial fertiliser-producing international locations reminiscent of China, India, the US, Russia and Canada. Rising delivery prices, and excessive oil and gasoline costs have additionally been contributing elements, together with firmer world demand from agriculture produces.
The Russia-Ukraine battle will add to those worth pressures, significantly if Russia’s exports undergo because of the conflict 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, reminiscent of 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 conflict in Ukraine would disrupt worldwide fertiliser commerce. However he warned corporations in opposition to 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 nicely 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 usually 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 maintain productiveness ranges low for the foreseeable future.
However the image isn’t uniform. Nations reminiscent of 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 be an necessary 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 typically 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 nicely for the realisation of improved agricultural productiveness on the continent.
It is a world problem for all farmers, and sadly, the final word crop yields that farmers harvest relies on using fertilisers. A discount in fertiliser use, and the ensuing unfavorable impression on yields, has implications for the customers internationally, significantly in poor international locations the place agriculture constitutes a big share of the financial system.