Home Impact producer Watch for price increases of these food and household products in South Africa

Watch for price increases of these food and household products in South Africa

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The consequences of the war in Ukraine are profound, says Anil Thakersee, a provider of executive investment solutions, PPS Investments.

The regional conflict already has global ramifications and, together with the sanctions imposed on Russia, will continue to impact global trade and commodity markets in the months to come.

Food and energy prices are at the heart of inflation cycles and remain a major theme for financial markets as many countries around the world have seen high levels of inflation for several decades, Thakersee said.

Recession risk has increased and markets are expected to remain volatile, Fidelity International chief executive Anne Richards said in the latest outlook warning from the World Economic Forum, Bloomberg reported.

The conflict in Ukraine dominated the first in-person forum in Davos, Switzerland, in two years, while soaring inflation, energy security, food shortages and climate change were also on the agenda , did he declare.

Ukraine’s Foreign Minister Dmytro Kuleba told a question-and-answer session that peace talks with Russia were going “nowhere” and compared Moscow’s offensive in the eastern Donbass region to a World War II battle. “Tanks, artillery, helicopter gunships, air strikes, multiple rocket launchers, it’s all involved,” he said.

“When you conduct an operation like this, you’re essentially saying ‘no’ to negotiations.”

Inflation

Thakersee said global inflation was on an upward trajectory before the war in Ukraine. The supply of the global economy and trade has been hit by the pandemic and subsequent lockdowns.

“To some extent, the war in Ukraine represents a continuation of these global economic challenges, acting as a headwind to global recovery and putting additional upward pressure on inflation.

“While Ukraine may not be a major trading partner for major economies, places like China, Europe and South Africa represent some of Russia’s major trading partners.”

The Ukrainian and Russian economies are major suppliers of raw materials, including titanium, palladium, wheat, corn, gas and oil.

Disruption to the supply chain for these products is already impacting the prices consumers pay, impacting disposable income, Thakersee said.

Impact on South Africa

Governments in emerging economies are limited in their ability to stimulate struggling sectors of the economy while people rarely have enough savings or income to handle price increases, PPS pointed out.

The impact of the conflict between Russia and Ukraine is already being felt by South Africans in multiple ways, Thakersee said. “With steep increases in fuel and electricity prices already plaguing consumers, many South Africans will now have to tighten their proverbial belts further to cover rising food prices.”

The war has raised fears of global food insecurity as these countries are major exporters of grains, oilseeds, fertilizers and crude oil, he added.

Russia is the world’s third largest producer of crude oil and petroleum, which is South Africa’s main import product. Consequently, the sharp rise in oil prices globally has significantly increased local fuel prices. Currently hovering around record highs, fuel prices are expected to increase further in the near future.

Cooking oil has also seen a significant increase in local prices, PPS said. Although South Africa has a good supply crop, it is still insufficient to meet local demand and as such we remain a net importer of sunflower oil.

“Russia and Ukraine both account for around 18-40% of global sunflower oil exports, so it’s no surprise that we’re starting to feel the heat. Vegetable oill also forms the basis of many other household products, shampoo, beauty products, margarine and even Paintingso we could see increases in many consumables.

Dr John Purchase, the longtime former chief executive of the Agricultural Chamber of Commerce (Agbiz), told Lester Kiewit on Cap speak that South Africa is the tenth largest source of sunflowers in the world, producing over 700,000 tons annually.

“This year we are expecting a larger crop of around 900,000, which is good for our availability of sunflower oil. Although we are still a net importer of vegetable oil in South Africa, particularly palm oil.”

Purchase said the Food and Agriculture Organization of the United Nations’ World Food Price Index indicates vegetable oil prices have risen massively in recent months. Between February and March, it climbed 23% before stabilizing somewhat. “Our prices are linked to the international price, if it increases, local prices will also increase.”

For vegetable oil, Purchase sees no shortage in the country, “but we see the price remaining high until global inventories return to normal.”

Purchase said agricultural producers are also hurting from rising fuel and fertilizer prices. A huge amount of fertilizer comes from Russia and Ukraine, he said, and being extremely disrupted, those prices have shot up by at least 30-50%, and even more in some cases.

“So this is the price we pay for a war in Ukraine. It impacts every person in society.

When it comes to major inflation cycles in history, food and energy have typically been the main drivers of those cycles due to their broader impact on the price of all goods and services, said PPP.

“While Ukraine is about to start planting in April/May, depending on how the war progresses, by the September harvest season, the longer-term impacts could be felt.

“Between Russia and Ukraine accounts for more than a quarter of wheat exports and South Africa imports around 30%, so any disruption in supply could impact prices of wheat products. wheat, such as cereal and bread“said Thakersee.

Major issues are also emerging, related to the disruption of supply chains globally, Purchase said. “It has been a huge problem, especially with container availability and congestion and blockages at Chinese ports. Also the blocking of Ukrainian ports and especially Russian ports,” he said.

China and Russia are huge destinations for South Africa for nuts and citrus fruits, he said. All of these factors have had negative effects on South Africa’s export industry.


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