Research organisation the Bureau for Food and Agricultural Policy (BFAP) has warned that the Russo-Ukrainian War could drive up food costs around the world, including in South Africa, both directly and indirectly. On the other hand, it will provide price support for South African agriculture in the short term.
The agency had already, in its food inflation report for February, warned of the war directly causing such price increases, because of the important role of both combatant countries in global food production. Ukraine was the world’s number four maize exporter, with an about 15% share of global exports, and Russia was a top exporter of wheat, whose share of global exports was some 20%. The two countries also ranked in the top ten of sunflower seed exporters.
But the conflict also threatened to drive up input costs for South African farmers. “Higher grain prices also drive up animal feed costs and the prices of products such as fertiliser, of which South Africa is a net importer, have already increased sharply,” pointed out BFAP. “Russia is a major exporter of oil, gas and fertiliser – all of which will drive production costs higher in 2022.”
However, the effect of the war on agricultural prices is not yet clear. “While there is still some time before [northern] winter crops are harvested and spring crops planted, an extended period of conflict has the potential to prolong the short term price response that is already evident,” observed the bureau. The conflict could create “significant risk for food supply chains”.
In addition, there are the effects of the severe and enduring drought in South America. This has led to Brazil’s soybean crop being 9% lower than was estimated in January. In turn, this is supporting most oilseed prices and also, to a degree, the prices of grains.
Despite the cost increases driven by these international factors, the stronger prices resulting from the same factors are set to drive a third expansion in South African agricultural gross domestic product in a row, concluded BFAP.