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The Ukraine war fallout will see South Africa mostly exposed with wheat imports, but not maize of which we have enough. Between them, Russia and Ukraine export about 29% of the world’s wheat, 14% of the world’s maize and 60% of the world’s sunflower oil.
This immediately triggers the alarm bells for consumers who worry about where food will come from in the future and how much it will cost. Do we produce enough maize and wheat for our own consumption? Should we have exported so much maize last year without keeping enough for ourselves?
According to Christiaan Vercueil, intern agricultural economist at Grain SA, Ukraine is the fourth largest producer of maize in the world and produces 42 million tons per year, with expected exports of 33.5 million tons, making up 17% of global export supply. Russia is the sixth largest producer of maize, producing 15 million tons, with expected export of 4.5 million tons.
When it comes to wheat, Ukraine is the third largest exporter with production of 33 million tons and expected exports of 24 million tons, making up 12% of global export supply. Russia is the largest producer in the world, with 75.5 million tons and expected exports of 35 million tons, which is 17% of global export supply.
Ukraine is the largest producer of sunflower oil in the world, with production of 17.5 million tons, which is 30% of global production, 61% of sunflower meal world exports and 50% of sunflower oil. Russia is the second largest producer of sunflowers, producing 15.8 million tons, which is 27% of global production, 20% of world sunflower meal exports and 28% of sunflower oil exports.
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Vercueil says due to the sanctions against Russia, its exports will be halted indefinitely until the conflict is resolved. “Ukrainian exports are at a total standstill as ports are under threat of attack. Even if ports were to function normally, there are no means for producers to move product from farms to these ports for export.”
He says maize will be the least affected as Russia’s planting season is not due for the next few months and most of Ukraine’s exportable maize has already been exported.
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South Africa produced 16,315,000 tons of maize during the 2021/22 marketing season, of which 8.6 million tons were white maize and 7.7 million tons yellow maize.
“Our current exports to date are estimated to be 568,569 tons for white maize and 2,473,253 tons for yellow maize, while local consumption is estimated at about 11 million tons. These figures indicate that South Africa still has ample supply to satisfy local demand until May when the new crop harvest starts.”
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On the other hand, South Africa is a net importer of wheat, as we do not produce enough wheat to meet local demand, Vercueil says. South Africa imports more or less half of our wheat demand, depending on our local harvest. South Africa uses 3.4 million tons of wheat per year.
“If the conflict continues to hinder wheat exports from Russia and Ukraine, we can source wheat from other countries. We imported mainly from countries such as Lithuania, Argentina, Australia and Latvia for the current season, but in the previous season we imported as much as 210,000 tons of wheat from Russia.”
However, Vercueil says, although South Africa can source wheat from various countries, the situation in Russia and Ukraine impacts world prices because they are such large role players in the international trade of wheat.
“Therefore, import prices to South Africa are also affected, irrespective of the origin of the imports. The downside is that this wheat will be very expensive as wheat prices has skyrocketed by nearly 68% in 2022 and are at record highs, surpassing the high prices of the 2008 financial crisis.”
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He says maize prices will be less susceptible to changes so far, but wheat prices are on an unprecedented rally of almost 68% for 2022 and it is very difficult to predict the extent to which this rally will continue as there are many variables at play.
Vercueil points out that the market prices of grain and oilseed are not the only products on record levels. Energy and input prices, such as oil, fertilizer and agro-chemicals are also high currently.
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Dr André van der Vyver, executive director of the South African Cereals and Oilseeds Trade Association (Sacota), says South Africa hardly ever imports sunflower seed or soybeans in raw format, although we import the processed product.
South Africa only imports sunflower seed cake in small quantities (approximately 12,000 tons in 2020/21), but last year we ran short of local product. The new crop is due for harvesting in April/May 2022. Sunflower seed oil is imported in larger quantities (approximately 220,000 tons in 2020/21).
“All of these prices jumped in the last two months with anything from 33% to 50%. Sunflower seed prices specifically have seen sharp increases locally and globally because Ukraine is such a big producer of sunflower seed.”
Van der Vyver says we can expect to see a local price increase, but not to the same extent as the raw commodities. “The cost contribution of the raw commodity to the retail price is relatively small, but it varies from product to product.”
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The Bureau for Economic Research at Stellenbosch University says there are additional concerns about the cost of fertilisers as Russia and Belarus are important players in this market. Belarus is one of the world’s largest producers of potash, a key ingredient of fertiliser.
“As with Russia, Belarus was hit by severe sanctions for supporting Russia’s war efforts. The sharp rise in grain prices, with fertilisers to follow, put large upside risks on already record-high global food prices.”
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