Agricultural exports to Russia are expected to remain unhindered despite the ongoing war in Ukraine. However, experts have their eyes set on the outcomes of the Black Sea Grain Deal.
While the extension is a welcome development and will likely benefit South Africa, the period is relatively short.
The Black Sea Grain Deal, allowing the safe Black Sea export of Ukrainian grain, was recently extended for 120 days. The deal and the Memorandum of Understanding on promoting Russian food products and fertilisers to the world markets are critical for global food security, especially for developing countries.
According to Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa (Agbiz), the extension of the grain deal is a good move. The extension comes with a lot of uncertainty about shipments for a prolonged period.
“The reprice benefits all wheat and vegetable importing countries and users of the products, as it would add downward pressure on prices… South Africa is one of the wheat importers that stands to benefit from softer global wheat prices,” Sihlobo said.
Good news for the feed industry
Furthermore, the animal feed industry could also benefit from general downward pressure on grain prices. Grain prices have been elevated in the past year, adding price pressures to businesses.
Ultimately, the extension is positive for global food prices, despite the ongoing uncertainty about what happens after the end of the current extension.
“We think it will be in Russia’s interest to extend the deal further when the current term expires, given that the country has ample wheat supplies that need to be exported to create space for yet another large production to be harvested soon.
“Hence, we remain optimistic that Black Sea grains exports will continue to supply the world market,” Sihlobo said.
The grain deal will be reviewed after the 120-day period. The initiative started in July 2022, and its primary goal is to allow grain movement from Ukraine to the world market without military attack by the Russians.
Since the deal started, Ukraine has exported roughly 25 million tonnes of grains and vegetable oils. Notably, global food prices have also moderated considerably over time, partly due to increased shipments of grains and vegetable oils from the Black Sea region to the world market.
Citrus exports to continue
Contrary to expectations, agricultural exports to Russia have not tanked since the beginning of the Russia-Ukraine war, amid mounting calls for South Africa to take a stand against Russia and impose sanctions.
The Citrus Growers Association’s (CGA) representative in Russia, Mikhail Fateev, predicted that the invasion would have little impact on Southern African citrus exports to the country, and figures have proven him correct, the CGA said.
The volume of citrus exported to Russia in 2022 exceeded the previous three years’ volumes, with 174 337 tonnes shipped to Russia compared to just more than 160 000 tonnes in 2021.
“Despite this increase, exporters to Russia will tell you that exporting to the country was very difficult. As the season started, shipping opportunities were limited as sanctions impacted trade flows,” CGA said.
At the same time, the cost of shipping to Russia increased and led to poor returns to the grower from that market.
With the export season coming up, it will depend on the readiness of South African ports.
The port of Durban had fewer challenges in 2022 than the previous year, with citrus exporters facing a relatively better export season from a logistics perspective, Sihlobo said.
“While there are still many challenges within logistics, Transnet’s willingness to cooperate closely with the agricultural community has helped improve product flow.
“There are currently various working groups between commodity organisations through Agbiz and Transnet, which are looking at various strategies that would smooth the flow of products better in the future,” he said.
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