Russia-Ukraine conflict likely to cause some food items’ prices to increase in SA : Sihlobo

Agricultural Business Chamber of South Africa Chief Economist Wandile Sihlobo says the Russia-Ukraine conflict is likely to create an upward swing of some food items’ prices in South Africa.

Russia has launched a military operation in Ukraine and the Ukraine Foreign Minister Dmytro Kuleba has warned that a full-scale invasion is under way in the country.

Tensions have been escalating between the two nations after Ukrainian President Volodymyr Zelenskyy in 2021 urged United States President Joe Biden to let Ukraine join North Atlantic Treaty Organization (Nato), a move that angered Russia and considers being a threat to its security.

The United States has now imposed sanctions on Russia and Kuleba has called on United Nations member states to do the same.

A map of countries that will impose sanctions on Russia:

Possible impact of the crisis on markets 

There has been rising concern on how the conflict will affect the world. Sihlobo says Russia and Ukraine are important in the supply of wheat, maize and sunflower oil.

“In as far as the supply of wheat, Russia makes up roughly nearly 30% of the global supply, that is Russia and Ukraine combined, that is a lot of wheat that they send to the global market. In as far as maize is concerned, roughly 14 % of global maize coming from them and 60% of global sunflower oil coming from them.”

According to Sihlobo, while South Africa can source the products elsewhere, there is a likelihood that the prices will be high which will affect food prices.

“We are coming from a year where South Africa’s food price inflation in 2021 averaged 6.5% from around 4.8% in 2020. If you were to ask what was driving inflation at that time, it was the global factors, particularly the elevated commodity prices. This time around we were still in that cycle where Brazil is dry and that is pushing up agricultural commodity prices internationally. China’s demand is one of those factors, now the additional upside risk is the one that we are discussing, the Russia-Ukraine story because of the importance of these countries in global agriculture. I think it will continue to add that upside pressure. And in South Africa, that is likely how we will feel the impact in the near term. “

Sihlobo says the conflict will, however, benefit other countries that export the goods.

“If you do have the commodity, it is basically going to be good news for you. And it is not just the story of wheat; it is the story of agricultural seeds.”

Sihlobo on the impact on food prices:

South Africa has called on Ukraine and Russia to go back to the negotiating table to solve the crisis.

“The UNSC is the body given the mandate for the maintenance of international peace & security and it must exercise its role fully. As South Africa, we believe all the issues of concern to any of the parties must be addressed in inclusive talks led by the UNSG,” said Minister of International Relations Naledi Pandor in a statement.