The higher input costs, which have been the dominant feature of South Africa’s (SA) agricultural sector over the past year, will likely prevail in the coming months, with negative effects on farmers’ financial conditions.
For the crop farming sub-sector, prices of fertiliser, herbicides and insecticides were up by more than 50% during the planting period of the 2021/22 season. Therefore, the crop losses in various regions of the country caused by floods proved so costly for farmers who had to replant or forego extremely wet areas this season.
In January 2022, the fertiliser prices remained elevated. For example, KAN/LAN (28), urea (46), and potassium chloride prices were up by 127% year-on-year (y/y), 182% y/y, and 114% y/y in January 2022, selling at around R13 933, R19 876 and R13 816 per tonne, respectively.
Herbicides show a similar price trend. For example, glyphosate, acetochlor and atrazine prices were up by 211% y/y, 139% y/y and 143% y/y in December 2021, respectively. Regarding insecticides, imidacloprid, lambda-cyhalothrin, and acetamiprid prices were up by 124% y/y, 45% y/y and 121% y/y, respectively, in December 2021.
There are many factors behind these sharp input cost increases, such as the supply constraints in critical fertiliser-producing countries, mainly China, India, the United States, Russia and Canada.
Other contributing factors
Rising shipping costs, as well as oil and gas prices are also contributing factors to the price increases, along with firmer global demand from the growing global agriculture. The ongoing tension between Russia and Ukraine has added to the upside price pressures of these agricultural input costs.
Summer crop producers have already incurred these costs as the crops are now growing. The primary focus for the coming month is the winter crop growers, mainly for wheat, canola, barley and oats, where planting for the new season crop will begin at the end of April.
This means that some of the input orders are already in the process. Thus, even though the harvests of 2021/22 winter crops, such as wheat, were the largest since 2002, and canola having had a record harvest, the profits will be squeezed by the high input costs in the upcoming production season.
For the summer crops, mainly maize, soya beans, sunflower seed, groundnuts, sorghum and dry beans, it will be a while before farmers embark on the 2022/23 production season, which will only begin in October.
There is uncertainty about the movement fertiliser and agrochemicals (herbicides and insecticides) prices in the coming months. The global supply of critical inputs is likely to have recovered by then, even if partially so, thus providing some price relief. Such optimism is the outlook of some analysts in the global fertiliser market.
SA imports approximately 80% of its annual fertiliser consumption and is a minor player globally, accounting for a mere 0,5% of total global consumption. Therefore, local prices tend to be influenced by developments in the major producing and consuming countries. From a usage perspective, much of the fertiliser imported by SA is utilised in maize production, accounting for roughly 41% of total fertiliser consumption.
The second-largest consumer is sugar cane farming at 18%. Fertiliser constitutes approximately 35% of grain farmers’ input costs and a substantial share in other agricultural commodities and crops.
In terms of agrochemicals (herbicides and insecticides), SA also imports a significant volume of over 90% of annual usage. This global dependency on critical agricultural inputs is because SA lacks the primary minerals or natural resources fundamental for fertiliser and agrochemical production. – Wandile Sihlobo, Agbiz