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