WEBVTT - Why the war in Iran Risks a Farming Crisis in Africa 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.320 --> 0:00:12.760 The Iran war has disrupted supplies of fertilizer, sending prices 0:00:12.880 --> 0:00:15.520 soaring and threatening global food production. 0:00:16.040 --> 0:00:19.480 Export of fertilizer is being impacted from the region as 0:00:19.480 --> 0:00:22.480 well as the price, so this is again translating into 0:00:22.560 --> 0:00:27.120 an impact on agriculture production as well as agricultural productivity, 0:00:27.200 --> 0:00:30.639 which would be translated later on into food price. 0:00:31.400 --> 0:00:34.720 African farmers are among those most at risk, with many 0:00:34.720 --> 0:00:38.080 fertilizer imports coming to the continent from the Persian Gulf. 0:00:38.479 --> 0:00:40.520 With the straight up worm news closed as well, you've 0:00:40.520 --> 0:00:41.840 got the shipping slowing down. 0:00:41.920 --> 0:00:43.800 So these key inputs like. 0:00:43.800 --> 0:00:46.600 Fertilizer and actually to some extent the food, the grains 0:00:46.600 --> 0:00:49.120 that's on these ships, they're all stuck. They're not getting 0:00:49.120 --> 0:00:51.639 to where they're meant to be. On today's podcast, we'll 0:00:51.640 --> 0:00:54.760 look at how the war is affecting global food production, 0:00:55.360 --> 0:00:58.760 where is facing the most disruption, and how long lasting 0:00:58.880 --> 0:01:05.679 the impacts could be. I'm Jennifer's Abasajob and this is 0:01:05.720 --> 0:01:09.120 the Next Africa podcast, bringing you one story each week 0:01:09.160 --> 0:01:12.080 from the continent driving the future of global growth with 0:01:12.160 --> 0:01:16.920 the context only Bloomberg can provide. And joining us this 0:01:17.000 --> 0:01:21.480 week is Bloomberg's EMA Agriculture team leader that is Agni 0:01:21.600 --> 0:01:25.640 Eshka Desuza, and also our sub Saharan Africa Breaking News 0:01:25.720 --> 0:01:29.399 team leader, Renee Fullgraph. Thank you both so much for 0:01:29.440 --> 0:01:32.319 being with us this week. Aggie, Let's just start with you. 0:01:32.520 --> 0:01:36.280 We've been reporting quite extensively about oil coming through the 0:01:36.319 --> 0:01:39.039 Strait of Horror Moves and just how significant it is 0:01:39.160 --> 0:01:42.880 for the energy sector, but not as much attention has 0:01:42.959 --> 0:01:46.800 been paid to the significance of the Strait for fertilizer production. 0:01:46.959 --> 0:01:50.080 Can you just walk us through why it is so important. 0:01:51.520 --> 0:01:56.240 Fertilizers are absolutely crucial to the production of food, just 0:01:56.280 --> 0:02:01.320 looking at the synthetic fertilizers nitrogen fertilizers that underpin roughly 0:02:02.120 --> 0:02:05.760 half of the global food production, and the Golf region 0:02:06.000 --> 0:02:09.680 as a whole is a key production shipping hub for 0:02:10.120 --> 0:02:15.239 crop nutrients for those fertilizers. Thanks to the Gulfs abandoned 0:02:15.400 --> 0:02:20.360 natural gas supplies, the region is home to some of 0:02:20.400 --> 0:02:24.480 the largest nitrogen fertilizer production plants. You know, at the 0:02:24.560 --> 0:02:28.880 same time, you know it's a source of sulfur, and 0:02:29.040 --> 0:02:32.760 sulfur is actually an ingredient in production of a different 0:02:32.800 --> 0:02:37.440 type of fertilizers, phosphate based fertilizers that are produced elsewhere. 0:02:38.080 --> 0:02:40.399 And at the same time, you know, it's a source 0:02:40.440 --> 0:02:44.519 of natural gas, and natural gas goes into fertilizer production 0:02:44.760 --> 0:02:48.360 plants around the world, so you've got this kind of 0:02:48.440 --> 0:02:52.959 multiple impact on supplies from the region. Just to give 0:02:52.960 --> 0:02:57.520 you some stats, the strait of Hormus handles about a 0:02:57.639 --> 0:03:01.960 third of the urrea shipment. URIEA is the most common 0:03:02.080 --> 0:03:05.840 type of nitrogen fertilizers, and at the same time it 0:03:05.919 --> 0:03:10.720 handles about half of the sulfur trade, so its importance 0:03:10.800 --> 0:03:11.400 is immense. 0:03:11.639 --> 0:03:15.840 You mentioned sulfur aggie and we've been reporting quite extensively 0:03:15.880 --> 0:03:20.079 about the volatility that we've seen across commodity markets. What 0:03:20.440 --> 0:03:24.160 have we seen from some of these fertilizer components in 0:03:24.240 --> 0:03:27.280 terms of the pricing and the volatility since the conflict began. 0:03:27.880 --> 0:03:30.120 The impact from the toking off of the strait of 0:03:30.120 --> 0:03:34.360 hormones has been huge. It essentially has stopped the flows 0:03:34.680 --> 0:03:39.760 and had an impact on constrained supplies. So on sulfur, 0:03:39.800 --> 0:03:42.440 the prices have been going up and pushing out the 0:03:42.520 --> 0:03:45.040 costs of production. But at the same time, you know, 0:03:45.640 --> 0:03:49.520 we suddenly have a stop to supply and the fact 0:03:49.520 --> 0:03:52.560 that natural gas is not flowing out the way it 0:03:52.720 --> 0:03:57.200 used to has had an impact on deliveries to fertilizer plants. 0:03:57.240 --> 0:04:00.920 And we have already seen production cas on the back 0:04:01.080 --> 0:04:06.400 of limited supplies of guests, particularly in India or Bangladesh. 0:04:06.480 --> 0:04:10.240 And you know, we're already seeing Europe coming under strain 0:04:10.280 --> 0:04:13.960 as well, just because of the higher production costs. Just 0:04:14.000 --> 0:04:16.880 to give you the idea of the prices, just in 0:04:16.920 --> 0:04:19.880 the space of three weeks, we have seen the prices 0:04:19.880 --> 0:04:24.000 of Yuria. You know, whether it's Egypt, Russia, or the 0:04:24.120 --> 0:04:28.880 United States, we've seen the prices go up by about 0:04:28.960 --> 0:04:33.679 at least forty percent. So it's had that really really 0:04:33.720 --> 0:04:35.400 sharp and dramatic impact. 0:04:35.720 --> 0:04:38.839 I want to get your take on how this trickles 0:04:38.839 --> 0:04:40.440 down and then Renee, I want I want to bring 0:04:40.440 --> 0:04:43.520 you in here. But Aggie, when we look at the 0:04:43.560 --> 0:04:47.040 impact of at least some of the volatility that we've 0:04:47.080 --> 0:04:50.480 seen in the Middle East, how does it factor down 0:04:50.720 --> 0:04:55.080 onto farmers across the African continent. Are we seeing it 0:04:55.200 --> 0:04:57.960 as extensive as it's maybe going to get? What would 0:04:57.960 --> 0:04:58.320 you say? 0:04:58.720 --> 0:05:02.000 So let's start with more general look at what it 0:05:02.040 --> 0:05:05.080 does to farmers and what behaviors we have seen, what 0:05:05.160 --> 0:05:08.919 behavioral changes we have seen among farmers, and then zoom 0:05:08.960 --> 0:05:13.520 into to Africa in particular, the constraints on supplies have 0:05:14.000 --> 0:05:21.600 provoked spurred scramble among farmers, a rush to secure those fertilizers. Right, 0:05:21.880 --> 0:05:25.240 they've been, you know, trying to make sure that they 0:05:25.240 --> 0:05:28.440 have enough, and they have enough at better prices that 0:05:28.440 --> 0:05:31.080 they're going to see in a few weeks time. So 0:05:31.120 --> 0:05:34.520 there's been this dramatic rush. But at the same time, 0:05:34.600 --> 0:05:37.719 what we're seeing now is that the governments, governments around 0:05:37.720 --> 0:05:41.839 the world are trying to step in and protect their supplies. 0:05:42.080 --> 0:05:45.760 And so you know, countries big producers like Russia and 0:05:45.880 --> 0:05:51.160 China have been curbing their exports. We've seen countries around 0:05:51.240 --> 0:05:54.960 the world trying to talk to different suppliers make sure 0:05:55.000 --> 0:05:58.040 that they have enough for their farmers. So we do 0:05:58.120 --> 0:06:02.120 have this rush and everyone is a fact. But just 0:06:02.200 --> 0:06:07.440 zooming into Africa now, this is a much more vulnerable continent. 0:06:07.720 --> 0:06:12.119 It's an important region, so it does rely a lot 0:06:12.240 --> 0:06:15.920 on imports of fertilizers from elsewhere. And at the same 0:06:15.920 --> 0:06:18.279 time as farmers are rashing, they need to kind of 0:06:18.360 --> 0:06:21.440 wouldbid each other, so the question is whether African governments 0:06:21.480 --> 0:06:25.040 African farmers are able to outbid those prices and actually 0:06:25.640 --> 0:06:29.279 pay as much as other countries are paying. Just to 0:06:29.440 --> 0:06:33.280 give you example on the dependence on imports for some 0:06:33.360 --> 0:06:36.720 of those countries, and we're just talking about golf fertilizers 0:06:36.839 --> 0:06:42.320 rather than global fertilizers, but just Sudan for example, fifty 0:06:42.320 --> 0:06:46.400 four percent more than half of the Sudanese fertilizer imports 0:06:47.000 --> 0:06:50.680 come from the golf. For Tanzania that's you know, about 0:06:50.720 --> 0:06:54.920 thirty percent, so Maaia. The same Kenyan fertilizer imports, you know, 0:06:54.960 --> 0:06:58.520 a quarter of them come from the golf. So it 0:06:58.560 --> 0:07:00.440 is a big dependence. On top of it, we've got 0:07:00.440 --> 0:07:04.760 a hit to costs, right, So the question is really 0:07:04.800 --> 0:07:07.840 how many African countries will be able to support their 0:07:07.839 --> 0:07:12.000 farmers so they get enough of those crop nutrients and renee. 0:07:12.000 --> 0:07:14.320 That's where I want you to jump in because you've 0:07:14.360 --> 0:07:18.000 been looking at specifically the impact on South African farmers. 0:07:18.040 --> 0:07:21.280 And the story here isn't just about fertilizer, is it. 0:07:21.520 --> 0:07:25.120 No, that's correct, Jen. So there's an African wheat farmers. 0:07:25.280 --> 0:07:28.400 They are in autumn now, so heading into winter and 0:07:28.440 --> 0:07:31.720 they are starting to plant soon, while there's summer crops 0:07:31.760 --> 0:07:34.520 such as the sunflower and the soybean. Guys, they are 0:07:34.560 --> 0:07:37.840 almost ready to harvest, and both of those activities leads 0:07:37.880 --> 0:07:40.560 a lot of diesel. South Africa imports most of its 0:07:40.600 --> 0:07:43.720 field products, so that means the price of diesel and 0:07:44.000 --> 0:07:48.280 gasoline is heavily dependent or heavily tracks oil price moves 0:07:48.320 --> 0:07:51.440 and their one exchange. Right. If we look at the 0:07:51.440 --> 0:07:55.520 preliminary data that's released by the Central Energy Fund, it 0:07:55.600 --> 0:07:58.400 shows that the wholesale price for diesel could go up 0:07:58.400 --> 0:08:02.480 by almost fifty percent on the first of April. So 0:08:02.880 --> 0:08:05.320 the farmers are trying to get ahead of that cost increase. 0:08:05.760 --> 0:08:08.560 Some of me trying to fill up to stock up, 0:08:08.800 --> 0:08:11.240 but that means the filling stations are running out of diesel. 0:08:11.720 --> 0:08:15.240 Some filling stations are limiting people to just getting fifty 0:08:15.240 --> 0:08:18.160 liters a day, and one of the farmers I spoke 0:08:18.240 --> 0:08:21.119 to said he needs about two thousand liters a day 0:08:21.840 --> 0:08:24.440 once he starts planting. Now, if you can only get 0:08:24.480 --> 0:08:28.280 fifty liters a day, he is going to phrase real problem. 0:08:28.680 --> 0:08:31.240 So the grain farmers are really worried, firstly about the 0:08:31.440 --> 0:08:34.640 price shop that's waiting for them, and secondly, simply will 0:08:34.480 --> 0:08:37.640 be able to get diesel because they are being throttled 0:08:37.679 --> 0:08:39.440 and some filling stations are running out. 0:08:39.800 --> 0:08:41.839 And again, Renee, stick with us. We're going to take 0:08:41.840 --> 0:08:44.240 a quick break and when we come back, we'll talk 0:08:44.240 --> 0:08:46.600 more about what the long term effects of this crisis 0:08:46.720 --> 0:08:56.240 could be on the continent. We'll be right back, Welcome back. 0:08:56.280 --> 0:08:59.000 Today we're looking at the impact of the Iran war 0:08:59.120 --> 0:09:03.319 on food production. Agne Ashka de Susa and Renee Photograph 0:09:03.440 --> 0:09:07.920 are still with me, Aggie. How quickly do shocks like 0:09:07.960 --> 0:09:11.839 this start to hit food prices and consumers? What are 0:09:11.840 --> 0:09:13.720 we looking at at this point. 0:09:13.880 --> 0:09:16.640 That's a very good question, and I think it really 0:09:16.679 --> 0:09:21.160 will depend on how long the conflict lasts. We may 0:09:21.200 --> 0:09:26.440 not see the passing through of costs immediately, but it 0:09:26.520 --> 0:09:29.840 may take a few months before we do that. But 0:09:29.880 --> 0:09:33.360 then at the same time and farmers and producers may 0:09:33.720 --> 0:09:36.959 try to swallow those costs get the hit to their margins, 0:09:37.520 --> 0:09:40.040 but it is widely assume it's a matter of weeks. 0:09:40.040 --> 0:09:42.320 I think when it comes to fertilizer and the impact 0:09:42.440 --> 0:09:47.880 on production of food, many commentators are looking at six 0:09:47.960 --> 0:09:51.360 to twelve months. Considering that many farmers farmers in the 0:09:51.480 --> 0:09:55.920 Northern hemisphere, for example, are just planting and they may 0:09:55.960 --> 0:10:00.480 have enough stocks of fertilizers. But I think we are 0:10:00.520 --> 0:10:04.000 looking at like the next cycle of planting in the 0:10:04.040 --> 0:10:08.480 fall to see the impact from higher prices on the 0:10:08.520 --> 0:10:12.240 planting decisions of farmers. So I think some of that 0:10:12.320 --> 0:10:17.760 transmission of a cost may take longer. But one key 0:10:17.800 --> 0:10:20.440 point that you know and run attached on it, I 0:10:20.440 --> 0:10:23.079 think one key point we need to look at when 0:10:23.160 --> 0:10:26.120 we look at food production costs and food costs and 0:10:26.120 --> 0:10:30.000 food prices in total, it's not just fertilizers, it's not 0:10:30.320 --> 0:10:34.640 just fuel. The whole Modern food production is underpinned by 0:10:34.880 --> 0:10:38.079 the energy. You know, machinery is one thing fertilized, but 0:10:38.120 --> 0:10:40.200 then at the same time, you know, let's think about 0:10:40.720 --> 0:10:45.720 freight costs, containers, jet you know, aviation. You know a 0:10:45.720 --> 0:10:49.880 lot of foods are transported by ships, trucks. At the 0:10:49.920 --> 0:10:55.559 same time, you know, energy goes into production of packaging, plastic, packaging, cardboard. 0:10:56.280 --> 0:11:00.880 You need energy to power greenhouses producing our and edge 0:11:00.960 --> 0:11:05.240 and bakeries and all of that. So all in all, 0:11:05.600 --> 0:11:08.560 this impact of foodcasting is going to be immense. It's 0:11:08.679 --> 0:11:10.800 just a matter of time. I think it just the 0:11:10.920 --> 0:11:13.360 question is how long will it last? How long will 0:11:13.360 --> 0:11:16.680 this shall last? How long will this conflict last? 0:11:17.200 --> 0:11:20.839 Renee, did you sense that same level of concern that 0:11:20.960 --> 0:11:24.240 Aggie was just describing there, I mean, because as you mentioned, 0:11:24.280 --> 0:11:27.000 it is getting to autumn here in South Africa. 0:11:27.360 --> 0:11:30.240 Yeah, No, definitely. The economists and the people in the 0:11:30.280 --> 0:11:33.559 grain industry who spoke to they are very worried. And 0:11:33.600 --> 0:11:36.920 like I said, the farmers are price takers, so they 0:11:36.960 --> 0:11:41.199 won't be able to immediately pass on these higher costs 0:11:41.200 --> 0:11:44.720 of fuel and fertilizer to the consumers. So in the 0:11:44.800 --> 0:11:47.959 short term, the impact would mostly be logistics and transportation. 0:11:48.440 --> 0:11:51.600 About eighty percent of the grain products in South Africa 0:11:51.640 --> 0:11:54.319 are transported by a road, So if you're diesel is 0:11:54.400 --> 0:11:57.680 suddenly fifty percent more expensive just to get the product 0:11:57.720 --> 0:12:00.640 from the farm to the consumer. That's already an impact, 0:12:00.640 --> 0:12:03.920 the shorter term impact, and in the longer term, I mean, 0:12:04.120 --> 0:12:07.040 in this country, diesel and fertilize that it's about fifty 0:12:07.080 --> 0:12:11.600 percent of a farmer's input costs and if that increases, 0:12:11.880 --> 0:12:14.959 that is a significant heat to your profitability. And if 0:12:14.960 --> 0:12:18.000 it's too severe, some farmers will, as Adi said, simply 0:12:18.000 --> 0:12:22.320 stop producing which will eventually drive up the price for consumers. 0:12:23.160 --> 0:12:26.400 Renee, what is it that you're looking out for then? Now, 0:12:26.480 --> 0:12:28.920 as you continue to talk with a lot of the 0:12:29.040 --> 0:12:33.719 industry across South Africa about this very evolving situation in 0:12:33.760 --> 0:12:36.520 the Middle East and the potential impacts on the country. 0:12:36.559 --> 0:12:39.760 The idea I get is that people are mostly looking 0:12:39.920 --> 0:12:43.199 at government and industry associations to see if there's some 0:12:43.360 --> 0:12:46.480 sort of short term relief, especially on the fuel side. 0:12:46.679 --> 0:12:49.480 I mean, the government's options are fairly limited. I mean 0:12:49.480 --> 0:12:52.360 they've also said already that the options are limited, but 0:12:52.480 --> 0:12:55.560 that's pretty much the last hope that people are holding 0:12:55.559 --> 0:12:57.480 out for when it comes to fuel. And on the 0:12:57.480 --> 0:13:01.080 fertilizer side, like like I said, people have already got 0:13:01.080 --> 0:13:04.559 the initial stock for fertilizer for the planting. What they 0:13:04.559 --> 0:13:08.320 are worried about, especially here is the top dressing fertilizer, 0:13:08.360 --> 0:13:11.800 which I will need later in the season, and the 0:13:11.880 --> 0:13:15.560 price for that is still very dependent on what's happening 0:13:15.559 --> 0:13:18.160 in the Middle East. And if this situation is resolved 0:13:18.240 --> 0:13:21.960 in a timely fashion, I'll say then that shock may 0:13:22.000 --> 0:13:25.320 not be that big. So the people I spoke to 0:13:25.360 --> 0:13:28.400 are definitely saying it all depends on how long this wall. 0:13:28.320 --> 0:13:32.000 Losts Aggie, how about you? What's your final word here? 0:13:33.800 --> 0:13:37.840 We're watching. We're definitely watching that changes, you know, behavioral 0:13:37.920 --> 0:13:41.120 changes among farmers. What are they doing, what decisions, what 0:13:41.240 --> 0:13:45.880 planting decisions they're taking. Are they trying to cut back 0:13:45.920 --> 0:13:49.720 on fertilizer use? So I think that's the first thing 0:13:49.800 --> 0:13:52.720 to watch right now. We're also watching the reaction of 0:13:52.760 --> 0:13:58.880 governments because more protectionist measures will further titan supplies and 0:13:58.920 --> 0:14:02.199 will further boost prices for faumas. 0:14:02.640 --> 0:14:05.520 It's a domino effect, right. I think you both illustrated 0:14:05.559 --> 0:14:09.000 how this doesn't just stay within one sector at all. 0:14:09.040 --> 0:14:12.200 Agnieshka and Renee, thank you both so much for joining 0:14:12.280 --> 0:14:16.240 us this week. Really appreciate both of your insights. You 0:14:16.240 --> 0:14:18.360 can read all of our reporting on how the war 0:14:18.480 --> 0:14:26.640 is affecting food production across Bloomberg platforms. Now here's some 0:14:26.680 --> 0:14:29.360 of the other stories we've been following across the region 0:14:29.400 --> 0:14:33.920 this week. South Africa's state power utility SCOM said it 0:14:33.920 --> 0:14:36.640 has been ordered by the Supreme Court of Appeals to 0:14:36.720 --> 0:14:41.680 disclose details of its coal transport and diesel procurement contracts 0:14:41.960 --> 0:14:46.320 to activist group afrofum Escom said in a statement late 0:14:46.360 --> 0:14:50.760 Tuesday it will take legal advice before taking action, and 0:14:51.720 --> 0:14:54.720 the Reserve Bank of Zimbabwe held interest rates at thirty 0:14:54.760 --> 0:14:57.080 five percent this week to prevent the fallout from the 0:14:57.120 --> 0:15:01.400 Iran war from spilling into inflation. And you can follow 0:15:01.400 --> 0:15:05.200 these stories across Bloomberg, including the Next African Newsletter. We'll 0:15:05.200 --> 0:15:10.360 put a link to that in the show notes. This 0:15:10.400 --> 0:15:14.120 program was produced by Adrian Bradley and tiwa Adebayo. Don't 0:15:14.160 --> 0:15:17.120 forget to follow and review the show wherever you usually 0:15:17.160 --> 0:15:20.520 get your podcasts. But for now I'm Jennifer's Abasanja. Thanks 0:15:20.520 --> 0:15:21.640 as always for listening.