Global agricultural output
Specifically, the rising tensions between Ukraine and Russia are worth monitoring, given the role of these two countries in global agricultural output. Both countries are key players in global agriculture, and thus disruption in production or export activity could impact global agricultural commodity prices.
For example, Russia produces about 10% of global wheat while Ukraine accounts for 4%. Combined, this is nearly the size of the European Union's wheat production, according to the latest data from the International Grains Council. This wheat is not just for domestic consumption but for export markets. In 2020, Russia accounted for 18% of global wheat exports and Ukraine 8%. Together, this is just over a quarter of global wheat exports from just two countries.
Moreover, these countries are also notable players in maize, responsible for a combined maize production of 4%. In terms of exports, however, Ukraine and Russia's contribution is even more significant, accounting for 14% of global maize exports in 2020, according to data from Trade Map. Ukraine and Russia are also amongst the leading producers and exporters of sunflower oil. In 2020, Ukraine's sunflower oil exports accounted for 40% of global exports, with Russia accounting for 18% of global sunflower oil exports.
Threat to global food security
We don't know how the tensions between Russia and Ukraine will unfold in the coming days and possibly longer. There are reports of 100 000 Russian troops along the Ukraine-Russia border. This has also caused panic amongst some analysts that an intensifying conflict between these two countries and the potential trade disruption would have significant consequences for global food stability. We share this view, especially concerning global grains and oilseeds prices. These agricultural commodities have also been amongst the key drivers of global food prices since 2020, primarily because of dryness in South America, poor harvest in Indonesia, and the rising demand in China and India.
Hence, a disruption in trade in this significant producing region of the Black Sea would add to elevated global agricultural commodity prices and potentially be consequential to global food prices. However, the scale of the potential upswing in the global grains and oilseeds prices would primarily depend on the disruption and the time trade would be affected. For now, this can be viewed as an upside risk to global agricultural commodity prices.
The South African perspective
From South Africa's agriculture and agribusiness perspective, the impact of potentially rising tensions in Russia-Ukraine would be felt in the near term through the global agriculture commodity prices channel. There is direct agricultural trade between the two countries, but we view it as minimal.
South Africa typically imports wheat from Russia and Ukraine in terms of imports. For example, Russia is the 17th largest agricultural products supplier to South Africa, and Ukraine is the 44th. But in exports, Russia is a notable market – the 13th largest.
South Africa's products to Russia and Ukraine are mainly citrus, nuts, vegetables and tobacco. South Africa has stronger agricultural ties with Africa, Asia, the United Kingdom, and the European Union. For example, in the third quarter of 2021, the African continent and Asia were the largest markets for South Africa's agricultural exports, accounting for 35% and 33% in value terms, respectively. The European Union was the third-largest market, taking up 23% of South Africa's agricultural exports. The balance of 9% value constitutes the Americas and other regions of the world.
The African countries that would perhaps be more exposed to worsening tension between Russia and Ukraine are the Maghreb regions, specifically Egypt, Morocco, and Tunisia. Within the Sub-Saharan Africa region, Nigeria, Sudan and Tanzania would be the most exposed countries because of the large volumes of wheat they import from Russia and Ukraine. Other areas such as the Middle East and Asia import a substantial volume of grains and oilseeds from Ukraine and Russia, which can also be directly affected by the disruption in trade.
In sum, Russia and Ukraine are both key producers and exporters of global agricultural products. Although our domestic challenges are vital for the sustainability and growth of primary agriculture and agribusiness, the international events will indirectly affect the business conditions here at home.
We would likely experience the impact of the Russia-Ukraine tensions through global price channels in the near term. Still, the situation remains fluid and uncertain but will require close monitoring.