We have previously warned of the restrictions placed by countries on agricultural commodity exports, specifically rice and wheat. The concern was that restrictions in the world’s larger supplier markets would inevitably result in drastic price increases of the aforementioned commodities, of which South Africa is a net importer of.

South Africa imports all of its rice and half of its wheat requirements.  The restrictions on exports were announced in the Black Sea and Asia regions, although the world has large supplies of rice and wheat. The United States Department of Agriculture forecasts 2019/20 global wheat production at 764 million tonnes, up 4% y/y. And the 2019/20 rice production is estimated at 496 million tonnes, down by 1% y/y.

This past week, however, Romania, which is the world’s seventh-largest wheat exporter, retracted its statement on the ban of wheat exports.  Over the past five years, Romania’s wheat exports averaged 5.6 million tonnes. While not directly a big supplier of wheat to South Africa, the easing of exports is a positive move towards boosting the global wheat supplies for export markets. The International Grains Council estimates that the world has 176 million tonnes of wheat for exports within the 2019/20 season, which is a 5% increase from the previous season.

Under circumstances of increased wheat production and supplies for exports, one would ordinarily assume that wheat prices would be somewhat lower than levels seen this time last year. But this is not the case.

Global wheat prices traded around US$238 per tonne (US HRW) on 22 April 2020, which is up 13% y/y. The increase can, in part, be attributed to the restrictions on exports announced by various countries over the past couple of weeks amid fears about the timeframe of the COVID-19 pandemic. If we could see similar statements as Romania or assurance that there won’t be an export restriction on wheat from major wheat-producing countries, there could be some ease in the global wheat market about supplies throughout the season.

This is a message that was widely shared in the G20 Extraordinary Agriculture Ministers Meeting, earlier this week, noting a need to “guard against any unjustified restrictive measures that could lead to excessive food price volatility in international markets and threaten the food security and nutrition of large proportions of the world population.”

In the case of South Africa, 2019/20 wheat imports could increase by 33% y/y to 1.8 million tonnes. This is 13% higher than the five-year average import volume, exacerbated by the decline in domestic wheat production on the back of unfavourable weather conditions in parts of the Western Cape in late 2019. As of 17 April 2020, South Africa had imported 804 335 tonnes of wheat, which equates to 45% of the volume the country intends to bring into its shores within the 2019/20 season. The leading suppliers so far are Germany, Lithuania, Poland, Latvia, Ukraine and Russia.

There is no doubt that over the coming weeks and months, there could be supply chain disruptions because of the pandemic. However, the hope is that trade policy in key producing counties doesn’t add to an already challenging environment for importing countries. We are counting on various countries upholding the G20 message.


Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za

Pin It on Pinterest

Shares
Share This
%d bloggers like this: