Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The Iran war has disrupted supplies of fertilizer, sending prices
Speaker 2: soaring and threatening global food production.
Speaker 3: Export of fertilizer is being impacted from the region as
Speaker 3: well as the price, so this is again translating into
Speaker 3: an impact on agriculture production as well as agricultural productivity,
Speaker 3: which would be translated later on into food price.
Speaker 2: African farmers are among those most at risk, with many
Speaker 2: fertilizer imports coming to the continent from the Persian Gulf.
Speaker 2: With the straight up worm news closed as well, you've
Speaker 2: got the shipping slowing down.
Speaker 1: So these key inputs like.
Speaker 2: Fertilizer and actually to some extent the food, the grains
Speaker 2: that's on these ships, they're all stuck. They're not getting
Speaker 2: to where they're meant to be. On today's podcast, we'll
Speaker 2: look at how the war is affecting global food production,
Speaker 2: where is facing the most disruption, and how long lasting
Speaker 2: the impacts could be. I'm Jennifer's Abasajob and this is
Speaker 2: the Next Africa podcast, bringing you one story each week
Speaker 2: from the continent driving the future of global growth with
Speaker 2: the context only Bloomberg can provide. And joining us this
Speaker 2: week is Bloomberg's EMA Agriculture team leader that is Agni
Speaker 2: Eshka Desuza, and also our sub Saharan Africa Breaking News
Speaker 2: team leader, Renee Fullgraph. Thank you both so much for
Speaker 2: being with us this week. Aggie, Let's just start with you.
Speaker 2: We've been reporting quite extensively about oil coming through the
Speaker 2: Strait of Horror Moves and just how significant it is
Speaker 2: for the energy sector, but not as much attention has
Speaker 2: been paid to the significance of the Strait for fertilizer production.
Speaker 2: Can you just walk us through why it is so important.
Speaker 1: Fertilizers are absolutely crucial to the production of food, just
Speaker 1: looking at the synthetic fertilizers nitrogen fertilizers that underpin roughly
Speaker 1: half of the global food production, and the Golf region
Speaker 1: as a whole is a key production shipping hub for
Speaker 1: crop nutrients for those fertilizers. Thanks to the Gulfs abandoned
Speaker 1: natural gas supplies, the region is home to some of
Speaker 1: the largest nitrogen fertilizer production plants. You know, at the
Speaker 1: same time, you know it's a source of sulfur, and
Speaker 1: sulfur is actually an ingredient in production of a different
Speaker 1: type of fertilizers, phosphate based fertilizers that are produced elsewhere.
Speaker 1: And at the same time, you know, it's a source
Speaker 1: of natural gas, and natural gas goes into fertilizer production
Speaker 1: plants around the world, so you've got this kind of
Speaker 1: multiple impact on supplies from the region. Just to give
Speaker 1: you some stats, the strait of Hormus handles about a
Speaker 1: third of the urrea shipment. URIEA is the most common
Speaker 1: type of nitrogen fertilizers, and at the same time it
Speaker 1: handles about half of the sulfur trade, so its importance
Speaker 1: is immense.
Speaker 2: You mentioned sulfur aggie and we've been reporting quite extensively
Speaker 2: about the volatility that we've seen across commodity markets. What
Speaker 2: have we seen from some of these fertilizer components in
Speaker 2: terms of the pricing and the volatility since the conflict began.
Speaker 1: The impact from the toking off of the strait of
Speaker 1: hormones has been huge. It essentially has stopped the flows
Speaker 1: and had an impact on constrained supplies. So on sulfur,
Speaker 1: the prices have been going up and pushing out the
Speaker 1: costs of production. But at the same time, you know,
Speaker 1: we suddenly have a stop to supply and the fact
Speaker 1: that natural gas is not flowing out the way it
Speaker 1: used to has had an impact on deliveries to fertilizer plants.
Speaker 1: And we have already seen production cas on the back
Speaker 1: of limited supplies of guests, particularly in India or Bangladesh.
Speaker 1: And you know, we're already seeing Europe coming under strain
Speaker 1: as well, just because of the higher production costs. Just
Speaker 1: to give you the idea of the prices, just in
Speaker 1: the space of three weeks, we have seen the prices
Speaker 1: of Yuria. You know, whether it's Egypt, Russia, or the
Speaker 1: United States, we've seen the prices go up by about
Speaker 1: at least forty percent. So it's had that really really
Speaker 1: sharp and dramatic impact.
Speaker 2: I want to get your take on how this trickles
Speaker 2: down and then Renee, I want I want to bring
Speaker 2: you in here. But Aggie, when we look at the
Speaker 2: impact of at least some of the volatility that we've
Speaker 2: seen in the Middle East, how does it factor down
Speaker 2: onto farmers across the African continent. Are we seeing it
Speaker 2: as extensive as it's maybe going to get? What would
Speaker 2: you say?
Speaker 1: So let's start with more general look at what it
Speaker 1: does to farmers and what behaviors we have seen, what
Speaker 1: behavioral changes we have seen among farmers, and then zoom
Speaker 1: into to Africa in particular, the constraints on supplies have
Speaker 1: provoked spurred scramble among farmers, a rush to secure those fertilizers. Right,
Speaker 1: they've been, you know, trying to make sure that they
Speaker 1: have enough, and they have enough at better prices that
Speaker 1: they're going to see in a few weeks time. So
Speaker 1: there's been this dramatic rush. But at the same time,
Speaker 1: what we're seeing now is that the governments, governments around
Speaker 1: the world are trying to step in and protect their supplies.
Speaker 1: And so you know, countries big producers like Russia and
Speaker 1: China have been curbing their exports. We've seen countries around
Speaker 1: the world trying to talk to different suppliers make sure
Speaker 1: that they have enough for their farmers. So we do
Speaker 1: have this rush and everyone is a fact. But just
Speaker 1: zooming into Africa now, this is a much more vulnerable continent.
Speaker 1: It's an important region, so it does rely a lot
Speaker 1: on imports of fertilizers from elsewhere. And at the same
Speaker 1: time as farmers are rashing, they need to kind of
Speaker 1: wouldbid each other, so the question is whether African governments
Speaker 1: African farmers are able to outbid those prices and actually
Speaker 1: pay as much as other countries are paying. Just to
Speaker 1: give you example on the dependence on imports for some
Speaker 1: of those countries, and we're just talking about golf fertilizers
Speaker 1: rather than global fertilizers, but just Sudan for example, fifty
Speaker 1: four percent more than half of the Sudanese fertilizer imports
Speaker 1: come from the golf. For Tanzania that's you know, about
Speaker 1: thirty percent, so Maaia. The same Kenyan fertilizer imports, you know,
Speaker 1: a quarter of them come from the golf. So it
Speaker 1: is a big dependence. On top of it, we've got
Speaker 1: a hit to costs, right, So the question is really
Speaker 1: how many African countries will be able to support their
Speaker 1: farmers so they get enough of those crop nutrients and renee.
Speaker 2: That's where I want you to jump in because you've
Speaker 2: been looking at specifically the impact on South African farmers.
Speaker 2: And the story here isn't just about fertilizer, is it.
Speaker 4: No, that's correct, Jen. So there's an African wheat farmers.
Speaker 4: They are in autumn now, so heading into winter and
Speaker 4: they are starting to plant soon, while there's summer crops
Speaker 4: such as the sunflower and the soybean. Guys, they are
Speaker 4: almost ready to harvest, and both of those activities leads
Speaker 4: a lot of diesel. South Africa imports most of its
Speaker 4: field products, so that means the price of diesel and
Speaker 4: gasoline is heavily dependent or heavily tracks oil price moves
Speaker 4: and their one exchange. Right. If we look at the
Speaker 4: preliminary data that's released by the Central Energy Fund, it
Speaker 4: shows that the wholesale price for diesel could go up
Speaker 4: by almost fifty percent on the first of April. So
Speaker 4: the farmers are trying to get ahead of that cost increase.
Speaker 4: Some of me trying to fill up to stock up,
Speaker 4: but that means the filling stations are running out of diesel.
Speaker 4: Some filling stations are limiting people to just getting fifty
Speaker 4: liters a day, and one of the farmers I spoke
Speaker 4: to said he needs about two thousand liters a day
Speaker 4: once he starts planting. Now, if you can only get
Speaker 4: fifty liters a day, he is going to phrase real problem.
Speaker 4: So the grain farmers are really worried, firstly about the
Speaker 4: price shop that's waiting for them, and secondly, simply will
Speaker 4: be able to get diesel because they are being throttled
Speaker 4: and some filling stations are running out.
Speaker 2: And again, Renee, stick with us. We're going to take
Speaker 2: a quick break and when we come back, we'll talk
Speaker 2: more about what the long term effects of this crisis
Speaker 2: could be on the continent. We'll be right back, Welcome back.
Speaker 2: Today we're looking at the impact of the Iran war
Speaker 2: on food production. Agne Ashka de Susa and Renee Photograph
Speaker 2: are still with me, Aggie. How quickly do shocks like
Speaker 2: this start to hit food prices and consumers? What are
Speaker 2: we looking at at this point.
Speaker 1: That's a very good question, and I think it really
Speaker 1: will depend on how long the conflict lasts. We may
Speaker 1: not see the passing through of costs immediately, but it
Speaker 1: may take a few months before we do that. But
Speaker 1: then at the same time and farmers and producers may
Speaker 1: try to swallow those costs get the hit to their margins,
Speaker 1: but it is widely assume it's a matter of weeks.
Speaker 1: I think when it comes to fertilizer and the impact
Speaker 1: on production of food, many commentators are looking at six
Speaker 1: to twelve months. Considering that many farmers farmers in the
Speaker 1: Northern hemisphere, for example, are just planting and they may
Speaker 1: have enough stocks of fertilizers. But I think we are
Speaker 1: looking at like the next cycle of planting in the
Speaker 1: fall to see the impact from higher prices on the
Speaker 1: planting decisions of farmers. So I think some of that
Speaker 1: transmission of a cost may take longer. But one key
Speaker 1: point that you know and run attached on it, I
Speaker 1: think one key point we need to look at when
Speaker 1: we look at food production costs and food costs and
Speaker 1: food prices in total, it's not just fertilizers, it's not
Speaker 1: just fuel. The whole Modern food production is underpinned by
Speaker 1: the energy. You know, machinery is one thing fertilized, but
Speaker 1: then at the same time, you know, let's think about
Speaker 1: freight costs, containers, jet you know, aviation. You know a
Speaker 1: lot of foods are transported by ships, trucks. At the
Speaker 1: same time, you know, energy goes into production of packaging, plastic, packaging, cardboard.
Speaker 1: You need energy to power greenhouses producing our and edge
Speaker 1: and bakeries and all of that. So all in all,
Speaker 1: this impact of foodcasting is going to be immense. It's
Speaker 1: just a matter of time. I think it just the
Speaker 1: question is how long will it last? How long will
Speaker 1: this shall last? How long will this conflict last?
Speaker 2: Renee, did you sense that same level of concern that
Speaker 2: Aggie was just describing there, I mean, because as you mentioned,
Speaker 2: it is getting to autumn here in South Africa.
Speaker 4: Yeah, No, definitely. The economists and the people in the
Speaker 4: grain industry who spoke to they are very worried. And
Speaker 4: like I said, the farmers are price takers, so they
Speaker 4: won't be able to immediately pass on these higher costs
Speaker 4: of fuel and fertilizer to the consumers. So in the
Speaker 4: short term, the impact would mostly be logistics and transportation.
Speaker 4: About eighty percent of the grain products in South Africa
Speaker 4: are transported by a road, So if you're diesel is
Speaker 4: suddenly fifty percent more expensive just to get the product
Speaker 4: from the farm to the consumer. That's already an impact,
Speaker 4: the shorter term impact, and in the longer term, I mean,
Speaker 4: in this country, diesel and fertilize that it's about fifty
Speaker 4: percent of a farmer's input costs and if that increases,
Speaker 4: that is a significant heat to your profitability. And if
Speaker 4: it's too severe, some farmers will, as Adi said, simply
Speaker 4: stop producing which will eventually drive up the price for consumers.
Speaker 2: Renee, what is it that you're looking out for then? Now,
Speaker 2: as you continue to talk with a lot of the
Speaker 2: industry across South Africa about this very evolving situation in
Speaker 2: the Middle East and the potential impacts on the country.
Speaker 4: The idea I get is that people are mostly looking
Speaker 4: at government and industry associations to see if there's some
Speaker 4: sort of short term relief, especially on the fuel side.
Speaker 4: I mean, the government's options are fairly limited. I mean
Speaker 4: they've also said already that the options are limited, but
Speaker 4: that's pretty much the last hope that people are holding
Speaker 4: out for when it comes to fuel. And on the
Speaker 4: fertilizer side, like like I said, people have already got
Speaker 4: the initial stock for fertilizer for the planting. What they
Speaker 4: are worried about, especially here is the top dressing fertilizer,
Speaker 4: which I will need later in the season, and the
Speaker 4: price for that is still very dependent on what's happening
Speaker 4: in the Middle East. And if this situation is resolved
Speaker 4: in a timely fashion, I'll say then that shock may
Speaker 4: not be that big. So the people I spoke to
Speaker 4: are definitely saying it all depends on how long this wall.
Speaker 2: Losts Aggie, how about you? What's your final word here?
Speaker 1: We're watching. We're definitely watching that changes, you know, behavioral
Speaker 1: changes among farmers. What are they doing, what decisions, what
Speaker 1: planting decisions they're taking. Are they trying to cut back
Speaker 1: on fertilizer use? So I think that's the first thing
Speaker 1: to watch right now. We're also watching the reaction of
Speaker 1: governments because more protectionist measures will further titan supplies and
Speaker 1: will further boost prices for faumas.
Speaker 2: It's a domino effect, right. I think you both illustrated
Speaker 2: how this doesn't just stay within one sector at all.
Speaker 2: Agnieshka and Renee, thank you both so much for joining
Speaker 2: us this week. Really appreciate both of your insights. You
Speaker 2: can read all of our reporting on how the war
Speaker 2: is affecting food production across Bloomberg platforms. Now here's some
Speaker 2: of the other stories we've been following across the region
Speaker 2: this week. South Africa's state power utility SCOM said it
Speaker 2: has been ordered by the Supreme Court of Appeals to
Speaker 2: disclose details of its coal transport and diesel procurement contracts
Speaker 2: to activist group afrofum Escom said in a statement late
Speaker 2: Tuesday it will take legal advice before taking action, and
Speaker 2: the Reserve Bank of Zimbabwe held interest rates at thirty
Speaker 2: five percent this week to prevent the fallout from the
Speaker 2: Iran war from spilling into inflation. And you can follow
Speaker 2: these stories across Bloomberg, including the Next African Newsletter. We'll
Speaker 2: put a link to that in the show notes. This
Speaker 2: program was produced by Adrian Bradley and tiwa Adebayo. Don't
Speaker 2: forget to follow and review the show wherever you usually
Speaker 2: get your podcasts. But for now I'm Jennifer's Abasanja. Thanks
Speaker 2: as always for listening.