In less than two years South Africa’s agricultural sector has been dealt a few blows by countries who are seemingly weaponising trade policy instruments and banning exports during times of uncertainty to ensure adequate domestic supply.
However, according to Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa (Agbiz), countries should pull the plug on taking drastic self-interested policy measures.
Instead they should focus on supporting farmers to increase production and fill the gap in supplies.
Since last year, there’s been at least four bans impacting global agricultural trade. The war by Russia on Ukraine has also had a direct and more severe impact on the international market.
Double ban on grain
In 2020, the likes of Vietnam and Kazakhstan banned grain export. agriculture ministers from the G7 countries however criticised the move and the bans were subsequently reversed.
It was due to the uncertainty brought on by the Covid-19 pandemic that Kazakhstan and Vietnam introduced export bans on wheat.
“We are starting to see the second round of export bans of key commodities, all with the purported aim of protecting domestic consumers,” said Sihlobo.
China bans fertiliser exports
In July 2021, China went as far as banning exports of fertiliser in an attempt to ensure adequate domestic supply.
According to Sihlobo, “Such inward-looking policy actions often have a notable disruption on the highly interconnected global agricultural market.”
“In the case of China’s ban on fertiliser exports the impact was felt through a sharp rise in prices across the global fertiliser market,” Sihlobo said.
This was due China being the second-largest fertiliser exporter by value after Russia. They account for roughly 12% of global exports.
Indonesia’s ban on palm oil
Sihlobo explained that the first significant agricultural exporter to introduce restrictions this year was Indonesia at the end of April. Indonesia temporarily banned palm oil exports.
“This was a significant shock to the vegetable oil market because of Indonesia’s significance in global supplies,” Sihlobo stated.
Over the past five years, the country accounted for an average of 54% of global palm oil exports in value terms.
Before the ban the impact of the Black Sea export disruption and tighter palm oil supplies in Asia had already been visible in prices, Sihlobo explained. Recent export policy changes in Indonesia, Sihlobo said will likely lead to further increases in vegetable oil prices.
Russia’s war on Ukraine
The impact of the Russia-Ukraine invasion has had a direct and severe impact on the agricultural market. This is because both countries contribute substantial volumes of grains, oilseeds and fertiliser exports.
Collectively, these two countries make up nearly 30% of wheat exports, 30% of barley exports and roughly 60% of global sunflower seed exports. Russia alone accounts for about 14% of global fertiliser exports.
Sihlobo said global grains and oilseed prices have remained elevated in recent months and will likely show an uptick to a fresh high in May. Data is due to be released on 3 June.
ALSO READ: Russia-Ukraine war: ‘Keep food, fertiliser trade open’
India bans wheat exports
The most recent country, India, has followed with similar steps announcing a ban on wheat exports.
“This move will likely fuel further price increases in the wheat market at a time when the 2022-2023 global wheat stocks are expected to be tight as a result of the expected reduction in production in key areas of the EU and the Black Sea,” Sihlobo said.
India’s reason for the ban is to manage its overall domestic food security of the country and support the neighbouring countries’ needs.
The South Asian country is a substantial player in the global wheat market and is ranked the eighth largest wheat exporter in the world. “We are yet to see the full impact of these policy actions on prices,” Sihlobo said.
G7 agriculture ministers have condemned India’s decision saying that such export bans would worsen the global food crisis.
Support farmers, don’t ban exports
“Overall, with heightened uncertainty, the ban on exports of essential commodities should not be a preferred policy instrument, especially by major agricultural producers such as India and Indonesia, among others,” said Sihlobo.
The focus, he believes should be on supporting the farmers to increase production and fill the gap in supplies created by the closure of Black Sea exports due to Russia’s invasion of Ukraine.
“The frequent export bans present additional uncertainty to agricultural markets and heightened price volatility.
“Governments worldwide should do all they can within their fiscal abilities to support agricultural production, avert a global food crisis, and not rely on trade policy instruments that hurt the developing world.”
Siholobo said that agriculture ministers needed take a stand against such actions.
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