ECONOMIST AT GRAIN SA
South Africa (SA) relies on imports to meet the local input needs, which places the local agricultural industry at risk regarding availability and prices from the source countries. SA’s input industries have always managed to avoid critical input shortages failing which could have caused food security problems in the country.
Since March 2020 when COVID-19 restrictions were implemented, input availability has been disrupted, which also has implications on the price. The gap between fertiliser demand and supply internationally has put pressure on production while driving prices up.
Transportation costs, which are discounted in dollar terms, have doubled compared to last year. Oil prices have increased significantly. COVID restrictions disrupted raw material production in China earlier in 2020 while floods aggravated things in August and glyphosate manufacturing came to a halt during the repair work on two different plants that manufacture 65% of China’s glyphosate production.
In February 2021, there was the so-called ‘big freeze’ in Texas USA, which negatively affected the availability of raw materials and additives. Interruptions in logistics greatly influence the flow of agricultural chemicals and fertiliser, for instance, the Suez Canal and especially the transport of shipping containers. Oxygen is required in the production of glyphosate; however, at this point, it is prioritised for the COVID-19 patients.
PRICES OF INTERNATIONAL AGROCHEMICALS
Graph 1 indicates international herbicide prices per active ingredient over a year. All herbicides have increased in dollar terms – glyphosate and Atrazine took the lead at 145% and 33,8% respectively followed by metolachlor 27%, acetochlor 22% and trifluralin with 8%. Prices in rand terms followed a similar upward trend except for Acetochlor and trifluralin that decreased moderately. However, in rand terms, the ingredients did not increase in equal or greater proportions as can be expected due to the support of a stronger rand.
Graph 2 shows international insecticide prices per active ingredient over a year. Prices of all insecticides have increased except for Lambda-cyhalothrin, which decreased by 1,8% in a year. However, due to the strong rand, most active ingredients decreased, except for Imidacloprid that showed a moderate increase of 7% over a year.
PRICES OF FERTILISER
International fertiliser prices in dollar terms in the past year show a significant upward trend. Ammonia prices increased by 188%, followed by DAP 110% and urea 102%, while KCL increased moderately by 43,8%.
In rand terms ammonia, increased up to 135%, followed by DAP 71% and urea 64,7%, and KCL 17%. The moderate increases in rand are an indication of the counter-effect of a stronger rand. Graph 3 depicts average domestic fertiliser prices over time since 2010. Between July 2020 and July 2021. These are in line with international prices, showing an increasing trend for MAP 73,6%, LAN 46% and urea 64,8%, while KCL has decreased by 54,6%.
Agrochemical and fertiliser prices remained high over the past few months due to demand for the planting season in the Northern Hemisphere, fuelled by increasing commodity prices. Increases in the Brent Crude oil prices also drove up production and transport costs. All these developments have critical implications for the availability of agricultural chemicals and on the producer’s planning for the new summer grain season.