“No one can become a statesman if he is unaware of the problems of wheat.”
Words of the Greek philosopher Socrates.
Wheat and other cereals return to the heart of geopolitics after Russia’s invasion of Ukraine. Both countries play a fundamental role in the global agricultural market. African leaders must be vigilant.
There is a large agricultural trade between countries on the continent and Russia and Ukraine. African countries imported about $4 billion worth of agricultural products from Russia in 2020. About 90% of those imports were wheat and 6% sunflower oil. The main importing countries were Egypt, with almost half of the total imports, followed by Sudan, Nigeria, Tanzania, Algeria, Kenya and South Africa.
Similarly, Ukraine exported $2.9 billion worth of agricultural products to the African continent in 2020. 48% was wheat, 31% corn, and the rest included sunflower oil, barley, and soybeans.
Russia and Ukraine are big fish in the global commodity market. Russia produces about 10% of global wheat while Ukraine 4%. If they are combined, it is practically the total of the wheat production of the European Union. Wheat is used both for domestic consumption and for the export market. Both countries together account for a quarter of global wheat exports, 18% from Russia and 8% from Ukraine in 2020.
Both countries are also important for maize, with a combined production of 4%. However, Ukraine and Russia’s contribution to exports is even more important than production, accounting for 14% of global corn exports in 2020.
These two countries are among the leading producers and exporters of sunflower oil. In 2020, Ukraine’s sunflower oil exports accounted for 40% of global exports, while Russia’s accounted for 18%.
Russia’s military actions have caused panic among some analysts. The fear is that a further escalation of the conflict could disrupt trade, with serious consequences for global food stability.
I share these concerns, especially the consequences of the large increases in the price of grains and oilseeds globally, which have directly affected the rises in food prices globally since 2020. This has been mainly due to dry weather conditions in South America and Indonesia, which led to poor harvests, as well as demand in China and India.
The invasion’s disruption of trade in the important Black Sea producing region would add to high world prices for agricultural commodities, with possible knock-on effects for world food prices. The increase in the cost of raw materials was already evident within a few days of the conflict.
This worries the African continent, which is a net importer of wheat and sunflower oil. In addition, there is growing concern about drought in some regions of the continent. The disruption to commodity shipments would add to general concerns about food price inflation in a region that is a wheat importer.
Winter wheat harvest in the fields of Tersky Konny Zavod, a collective farm in the North Caucasus. /
what can we expect
The magnitude of the possible rebound in world grain and oilseed prices will depend on the size of the conflict and how long it affects trade.
For now, this can be seen as an upside risk to already high global agricultural commodity prices. In January 2022, the FAO Food Price Index stood at an average of 136 points, an increase of 1% from December 2021, the highest since April 2011.
Vegetable oils and dairy products were the main responsible for the rises.
In the days leading up to the Russian invasion, there was a spike in international prices for a number of commodities. Among them, corn (21%), wheat (35%), soybeans (20%) and sunflower oil (11%), compared to the corresponding period a year ago. This is important to stress, as 2021 prices were already high.
From the perspective of African agriculture, the impact of the war will be seen in the short term in the prices of world agricultural commodities.
An increase in prices will be beneficial for producers. For grain and oilseed farmers, rising prices represent an opportunity for financial gain. This will be particularly beneficial to them given rising fertilizer costs, which have strained farmers’ financial situation.
The conflict between Russia and Ukraine also comes at a time when drought in South America and rising demand for grains and oilseeds in India and China have weighed on prices.
However, the rise in the cost of basic products is bad news for consumers, who have already experienced food price increases in the last two years.
The conflict between Russia and Ukraine means that the pressure on prices persists. The two countries are the main contributors to the world grain supply. The impact that events may have on commodity prices cannot be underestimated.
Some countries on the continent, such as South Africa, benefit from the export of fruit to Russia. In 2020, Russia accounted for 7% of South African citrus exports and 12% of South African exports of apples and pears in the same year, the country’s second largest market.
However, from Africa’s perspective, Russian and Ukrainian agricultural imports from the continent are marginal, averaging just $1.6 billion over the past three years. The dominant products are fruits, tobacco, coffee and beverages for both countries.
Domino effect
All major producers in the agricultural sector are keeping an eye on developments in the Black Sea region. The repercussions can be seen in other territories, such as the Middle East and Asia, areas that also import a large volume of cereals and oilseeds from Ukraine and Russia. These regions will also be directly affected by the trade disruption.
Much is still unknown about the geopolitical challenges ahead. But African countries have reason to be concerned, given their reliance on grain imports. In the short term, countries are likely to feel the impact through higher prices, rather than actual shortages of commodities. Other wheat exporting countries, such as Canada, Australia and the United States, will benefit from a possible increase in demand in the short term.
Ultimately, the objective should be the de-escalation of the conflict. Russia and Ukraine are deeply integrated into world food and agricultural markets. Not only through supplies, but also through agricultural inputs, such as oil and fertilizers.
This article has been published in ‘
The conversation‘ and has been translated with the collaboration of Casa Africa. Translation: Mª Adela López González.
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