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The Western Cape minister of agriculture, Dr Ivan Meyer, recently met with Agri Western Cape, Vinpro, Wines of South Africa, the Fresh Producers Exporters’ Forum, Grain SA, the South African Table Grape Industry, the Citrus Growers Association and the National Wool Growers Association, regarding the impact of the Russian invasion of Ukraine on the Western Cape’s agricultural trade.
The Russian and Ukraine markets contribute to South Africa’s (SA) foreign income derived from exports of agricultural products, with a significant share of these products coming from the Western Cape.
SA’s agricultural exports to Russia and Ukraine combined were valued at R4,1 billion in 2020.
The horticultural products – oranges, pears, apples, mandarins, lemons, fresh grapes, and wine containers holding two litres or less – collectively contributed a share of R3,4 billion. Approximately 88% of this value is attributable to the Western Cape, a dominant player in the horticultural sector.
The cost of bread and farming inputs may increase
SA’s wheat and meslin imports from Russia and Ukraine were valued at R2,3 billion in 2020, and the Western Cape absorbed approximately 28% of those imports in value terms. Furthermore, statistics show that approximately 70 to 80% of all wheat flour produced is used for baking bread, attracting an estimated annual consumer expenditure of R6,7 billion in 2020.
In the Western Cape, 76% of all bread consumed is white bread. Therefore, a limited supply of wheat in the global markets will affect the domestic markets, and the increase in the price of bread will be one of the signs indicating a limited supply of wheat. This will have a direct impact on food security and the poor. Disruption in shipping, production and security concerns have already resulted in a 50% increase in the price of wheat.
Russia alone is responsible for 14% of global fertilizer exports, while the inability to export, and the increase in the price of oil will largely affect impact fertilizer, fuel and agrochemical prices.
Prices of primary agricultural inputs in SA are already up by more than 100% compared to January 2021. Fertilizers (35% of production costs), fuel (12%) and agrochemicals (8%) are all more expensive than in 2021. Industry role-players highlight that the most significant challenges currently facing the sector are logistics, financial losses and the diversion of fruit to other markets.
Read more about the Russia-Ukraine conflict’s grip on South African agriculture here.
Logistical challenges that traders face
Major shipping lines are not accepting any bookings or commodities; it is not limited to fruit trade.
Ports in Rotterdam, Antwerp and Bremerhaven are extremely congested due to the time-consuming scanning of containers for explosives.
The implications are that a 23-day journey of fruit from Cape Town to Saint Petersburg can be accompanied by various diversions and take up to 93 days to reach its final destination, resulting in the fruit being completely inedible.
Mitigating steps to be taken
- The Western Cape Department of Agriculture (WCDoA) will approach the Bureau for Food and Agricultural Policy (BFAP) to monitor the development of blockages in the Western Cape’s agricultural value chain with due consideration to both our trade’s export and import. This will assist the sector in developing an appropriate response to the negative impact the conflict is having on the Western Cape’s agricultural trade.
- During the height of the Covid-19 pandemic, the WCDoA closely monitored the province’s agricultural value chains. This approach will now be applied to this conflict.
- Given that market access is an apex priority for the Western Cape, the agricultural sector will explore the market opportunities offered through the African Free Trade Agreement as a viable option to offset the potential negative impact of the Russian attack on Ukraine.
- We are already engaging with Department of Agriculture, Land Reform and Rural Development to ensure that a sector response plan is developed to support our producers in the short to medium term while constantly monitoring the conflict.
The above steps will not detract from the Western Cape Government’s commitment to ensure that measures to improve productivity and greater efficiency at the Port of Cape Town continue to receive attention. – Press release, the Western Cape Department of Agriculture