Regular readers of this blog would know that I write often. But the frequency over the past few weeks has reduced somewhat because of the increased demand for time in this unusual time of the COVID-19 pandemic. For the sake of consistency and ensuring that I cover key agricultural events, I will commit into a Thursday evening newsletter (of course, this doesn’t mean I won’t post when there are important agricultural events).
Although global agriculture has not been hard hit by the COVID-19 pandemic as other sectors of the economy, the fears and uncertainty about how long the world will grapple with the virus have led to several countries introducing restrictive measures on exports. Wheat and rice have been the casualties of these new measures. Either one looks at Kazakhstan, Cambodia or Vietnam, there are introductions of export bans on wheat and rice.
Leaving the COVID-19 pandemic aside for a moment; the world has sufficient wheat and rice supplies. In the 2019/20 production season, global wheat production was 763 million tonnes, up 5% y/y and the stocks were at 275 million tonnes, up 4% y/y. In the case of rice, the 2019/20 global harvest is 499 million tonnes, roughly unchanged from the previous season, with the stocks at 177 million tonnes (up 2% y/y).
This goes to show that the restriction on exports is not because of fears of the scarcity of the commodities, but rather the uncertainty of how long it will last. Countries are then making drastic policy decisions to prepare for the worst. But their quest for safety has negative consequences to the importing countries of the commodities.
Consider South Africa, a country that imports about 50% of its annual wheat consumption of 3.4 million tonnes and 100% of its annual rice consumption of 1.0 million tonnes. Any glitches in the global wheat and rice markets have a direct impact on the South African consumer, perhaps more so on rice relative to wheat. The recent announcements of a ban on rice exports in Vietnam, coupled with logistical challenges in India amid the lockdown resulted into a drastic increase in rice prices over the past few days – see Exhibit 1 below. Depending on whether prices are sustained at these elevated levels, the South African consumer could be a casualty of the trade policy changes implemented in Vietnam, Cambodia and logistics glitches in India, amongst other developments.
This is a case even though; South Africa imports very small quantities of rice from the aforementioned countries. About 70% of South Africa’s rice is usually imported from Thailand, with 20% from India ad the rest from Pakistan, China and Vietnam, amongst other countries. What I will be watching closely in the coming days are developments in Thailand, any drastic policy changes there could have notable implications on the South African rice market, and also neighbouring countries. The imports are usually evenly spread across the year, with a slight peak in volumes in the last quarter of each year. On average, about 10% of the imported rice into South Africa each year is re-exported to Swaziland, Botswana, Zimbabwe, Lesotho, Namibia and Zambia.
Aside from the Southern African region, other countries that are notable importers of rice in the African continent are Benin, Côte d’Ivoire, Nigeria and Senegal. These countries, along with South Africa, collectively account for 44% of Africa’s 2020 rice import forecast of 17.6 million tonnes, according to data from the International Grains Council.
In the case of wheat, I am not as cautious of the current conditions as I am in rice. The reason being South Africa’s relative difference in dependency on wheat imports compared to rice, and also due to the encouraging communication from the Black Sea countries. For example, on April 6, Ukraine Chair Parliamentary Committee on Agrarian and Land Policy noted that the country’s domestic food security is intact with supplies sufficient to meet local and export demand. Hence, they don’t envisage export bans of wheat.
As of April 3, South Africa had imported 42% of the volume of wheat the country intends to bring into our shores within the 2019/20 season. The total is set to be 1.8 million tonnes. The leading supplies thus far are Germany, Lithuania, Poland, Latvia, Ukraine, Russia and the Czech Republic. As with rice, it is key that one monitors developments in the wheat market in these countries.
Aside from the aforementioned commodities, South Africa’s food supplies are intact, as I explained a few weeks back here. The restriction in exports that we are seeing is not necessarily a rise of “food nationalism” but rather fear induced by the uncertainty about the timeframe of the COVID-19 pandemic.
Quick links on what I’ve recently read
The IMF economists have an early view of the economic impact of the COVID-19 pandemic in 5 Charts (see here)
The OECD Economics Department is evaluating the initial impactofCOVID-19 containment measures on economic activity (see here).
Impact of COVID-19: Changing trade policy in a global pandemic – Potential implications for South Africa’s rice supply chain: The Bureau for Food and Agricultural Policy (see here)
What music am I listening to?
Not many people know this, but I listen to a lot of hip-hop. And in-between the challenges of COVID-19, I’ve soaked myself this week into Nas – The Lost Tapes 2 (full album) (listen to it here)
Follow me on Twitter (@WandileSihlobo). E-mail: firstname.lastname@example.org