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Russia has halted the Black Sea grain deal, brokered by the United Nations and Turkey in July 2022 to combat a global food crisis. The implications of this decision will become clear over the coming days and weeks.
One of the major contributors to the current slowing of global agriculture commodity prices (food prices) is the Black Sea grain deal, which allowed for the safe movement of grain from Ukraine and Russia since July 2022. Therefore, Russia’s refusal to renew the grain deal presents an upside risk to global grain prices, which may undermine the gains we were all starting to enjoy from the slowing grain prices, specifically in the major importing regions.
While the majority of grain from the Black Sea was primarily exported to Europe, the Middle East and North Africa, the availability of grain and the decline in prices indirectly benefited the global community.
How will it affect South Africa?
Regarding South Africa, we are not directly at risk as we have large domestic grain supplies. Our maize harvest is at 16,35 million tons. This crop is 6% more than the 2021/22 season and the second-largest harvest on record. This means South Africa will have over three million tons of maize for exports in the 2023/24 marketing year. With that said, we still import roughly half of our annual wheat usage, but most of this for the 2022/23 season is already on our shores.
For example, on 7 July, South Africa’s 2022/23 wheat imports were at 1,1 million tons out of the seasonal import forecast of 1,6 million tons. South Africa’s major wheat suppliers in the 2021/22 season were Argentina, Lithuania, Brazil, Australia, Poland, Latvia and the United States.
If one investigates South Africa’s wheat import data for the past five years, Russia was one of the significant wheat suppliers, accounting for an average share of 26% yearly. Argentina and Brazil replaced this in the 2021/22 season. However, Russia is back on the suppliers’ list in the 2022/23 season and is again one of the significant suppliers of wheat to South Africa thus far. Still, this does not mean South Africa will be insulated from this disruption.
The price reaction to the news of Russia’s refusal is worth monitoring and could impact South African consumers if no solution is found in the near term regarding the grain movement from this region. However, the extent of that will depend on how global grain markets react to this current glitch caused by Russia. Importantly, Russia has large wheat supplies that must be exported in the 2023/24 season, so monitoring those shipments will be important. – Wandile Sihlobo, Agbiz