Opinion

How Will the Russia-Ukraine Conflict Impact African Agricultural Markets and Trade?

Fresh Mandarin
Russia
Wheat
Fruits
Ukraine
Published Feb 28, 2022
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There is growing concern that the ongoing conflict between Russia and Ukraine could significantly impact the African consumer market, as both nations supply African countries with vital food commodities. In 2021, African countries purchased goods from Russia and Ukraine valued at USD 4 billion and USD 2.9 billion, respectively. We are already witnessing inflation in grains and oilseeds prices on the back of the situation in Russia and Ukraine. Fruit exports from SA could be significantly impacted by the conflict as well, as Russia is a major market for South African fruit accounting for 7% of SA citrus exports and 12% of SA apple and pear exports.

There is growing concern that the ongoing conflict between Russia and Ukraine could significantly impact the African consumer market, as both nations supply African countries with vital food commodities. In 2021, African countries purchased goods from Russia and Ukraine valued at USD 4 billion and USD 2.9 billion, respectively. The growing conflict could disrupt trade between both nations and Africa and affect food supply chains to a certain extent in the continent. The African continent is a net importer of sunflower oil and wheat. Egypt, Sudan, Nigeria, Kenya, Algeria, and SA import large wheat and sunflower oil volumes from Ukraine and Russia.

We are already witnessing inflation in grains and oilseeds prices on the back of Russia and Ukraine's conflict. This surge in prices could help increase farmer margins for grains and oilseeds in Africa, offsetting elevated fertilizer costs. On the flip side, the potential increase in prices could trickle down the food chain, impacting end-users.

Fruit exports from SA could be significantly impacted by the conflict as well, as Russia is a major market for South African fruit, accounting for 7% of SA citrus exports and 12% of SA apple and pear exports. Russia is also the second leading market for SA apples and the top destination for pears, importing 39,855 mt of South African pears in 2021. Mandarin exports to Russia increased to 37,305 mt in 2021, from 31,735 mt the previous year, and lemon and lime exports reached 40,114 mt in 2021, a 9% YoY increase. SA's citrus season recently began, and shipments to Russia could be disrupted by the conflict, significantly impacting SA's export revenue. SA citrus exporters need to practice caution when negotiating contracts with Russian buyers, as the military conflict makes fruit exports to the region volatile and unpredictable. Alternative citrus markets such as the Netherlands and the US could be more suitable and stable destinations, and markets such as the UK, Nigeria, Bangladesh, and the UAE could be suitable options for apples and pears.

Given that African countries are heavily dependent on grain imports, any disruption in the grain market in Ukraine and Russia could be far-reaching. The last wheat tender issued by Egypt was canceled after it received only one offer of 60,000 mt of French wheat. If Russia and Ukraine become unable to export wheat to their North African buyers, other major wheat exporters such as the EU, Australia, Canada, and the US stand to gain from any potential loss. In the EU, wheat production is forecast to be up 10% to 138.4 million mt while Australia is also forecast up 7% to 35.5 million mt. These two markets have the biggest chance to gain as production in the US and Canada is expected to fall.

Much uncertainty lies ahead as the conflict ensues. However, African nations have cause for concern due to their dependency on grains imports. The impact could also be felt in the Middle East and Asia, as they remain significant markets of grains and oilseeds from Russia and Ukraine.

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