Overall market risk: Across the globe, there continues to be a significant level of inflation in domestic food prices. Based on the most recent data available for 2023, a majority of low- and middle-income countries are grappling with high levels of inflation. According to the World Bank, more than 5% inflation was observed in 70.6% of low-income countries, 81.4% of lower-middle-income countries, and 84% of upper-middle-income countries, with a considerable number experiencing inflation rates in the double digits. Nonetheless, the World Bank predicts that Kenya‘s economy will experience a slightly faster growth rate this year, primarily due to the recovery of the crucial agriculture sector. The nation’s economy is expected to expand by 5.0% in 2023, a slight increase from the 4.8% growth recorded last year. The recent improvement in rainfall across farming regions, following two years of debilitating drought, is anticipated to enhance production and alleviate inflationary pressures. In South Africa, inflation is anticipated to stabilize at around 4.5% in 2024 and beyond. In Rwanda, agriculture assessment reports have shown that the country has been affected by drought at more than 70%, and therefore, there is a greater need to mobilize farmers to cultivate all available land for season 2024A. Due to these, domestic prices for food commodities have increased significantly.
On matters concerning fertilizer, there is an optimistic forecast in the respective fertilizer markets as international prices of N, P and K are gradually decreasing and availability from different trade routes normalising.
Availability and Affordability: Overall, no major fertilizer shortage has been reported across East and Southern African countries, with little pockets of limited to moderate inventory reported in Malawi, Mozambique etc. In The East region where the main season has concluded, demand is low. In the southern region, importers and distributors are positioning fertilizers ahead of the season.
As per the Fertilizer Association of Malawi (FAM), there is an approximate stock of 100,000 MT of NPK and Urea fertilizers within the country. Furthermore, there are plans for additional imports in the upcoming months, with the only hurdle being the availability of forex. In Tanzania, enough supply to meet demand has been reported. As of June 2023, about 900K MT of fertilizers was reported in the country. About 10% of this has been reported as exports. In Zimbabwe, retail outlets have reported moderate to low stocks. The primary cause for this is the reluctance and incapability of fertilizer manufacturers and distributors to maintain large inventories. This is because of elevated interest rates for borrowing and the inadequate cash flow resulting from the market’s liquidity crunch. Sable Chemicals has not been able to produce anything from the beginning of the year up to now due to liquidity constraints and severe working capital limitations. In Ethiopia, the distribution of fertilizers is ongoing smoothly with no major setbacks.
Distribution: No major issues have been reported at the ports and border posts in most countries, but inefficiencies at the port of Beira is of concern to traders supplying product for the 2H of the year.
In Northern Cape in South Africa, flooding has resulted in some road closures that could affect the transportation of commodities to the region. In Mozambique, Beira and Nacala ports which serve as the main ports of inland countries have continued to report inefficiencies such as delays and high taxes, especially on handling fertilizers. In Kenya, the increase in fuel prices could see a rise in transportation cost of commodities. On the other hand, KPA has reported a growth (in TEU’s) of Mombasa port as evidenced by the recent increased operations.