Overall market risk: The Draft Nairobi Declaration on Africa Fertilizer and Soil Health Summit, held on May 7-9 in Nairobi, outlines a comprehensive plan to enhance agricultural productivity, soil health, and sustainability across Africa. It commits to tripling domestic fertilizer production by 2034 to reduce import reliance, reversing land degradation on 30% of degraded soils through integrated management practices, and operationalizing the Africa Fertilizer Financing Mechanism for improved fertilizer access and soil health interventions. Additionally, it emphasizes formulating and harmonizing policies, improving delivery systems, enhancing public-private partnerships, and promoting knowledge sharing and access to quality extension services for farmers. The declaration highlights the importance of sustainable agricultural practices and regional cooperation to tackle food security and environmental challenges.
The global outlook shows signs of improvement with modest growth, as the impact of tighter monetary conditions persists but global activity remains resilient and inflation falls faster than initially projected. Recently Across Africa, there were efforts to enhance payment systems for local currencies. For instance, the Pan-African Payment and Settlement System (PAPSS), which was developed by the African Union and the African Export-Import Bank, is a centralized financial market infrastructure enabling the secure flow of money across African borders. In Zimbabwe, a new gold-backed currency called the ZiG, or Zimbabwe Gold was rolled out to mitigate the currency instability and hyperinflation that has plagued the country for decades.
Availability and Affordability: Globally, urea prices surged from the $280s to the $310s per ton FOB, reflecting a strong market. However, this optimism is not consistent worldwide, as demand is weak in other areas. In Brazil, the market has softened due to flooding, while India has ample stocks, and the northern hemisphere is off-season. Regarding phosphates, India’s bid for $500 per ton CFR has driven prices down, while in China, prices have risen due to strong domestic demand and limited production.
In East Africa, where the main planting season has just concluded and farmers are preparing for the short rain season, demand for fertilizers is not at its peak. In Ethiopia, though the EABC has provided fertilizers, distribution issues due to conflict in some regions is being witnessed. In Kenya, fertilizer shipments are being recorded indicating enough supply for the coming months. In Rwanda, limited stocks of top-dressing fertilizers such as Urea has been reported. In other areas, preparation for season 2024C is ongoing which could see a rise in fertilizer demand. In the southern region where the winter cropping season has begun, stockpiling efforts are ongoing. In Zambia, demand for urea and compound D prices registered a dip this month. The same situation is being observed in Mozambique but for urea and phosphate products. Malawi continues to grapple with forex issues. This could hamper fertilizer imports and overall affect crop production this year.
Distribution: The IMF has reported a significant 60% year-over-year decline in shipping volume through the Suez Canal due to regional conflict. Meanwhile, data from the IMF’s Portwatch platform, in collaboration with Oxford University, indicates that shipping volume at the Cape of Good Hope, a key alternative route, has nearly doubled. On freight, cargo coming in from the Middle East to Eastern Africa dropped freight rates/mt by ~1 percentage point (pp).For handy size vessels (15-35dwt) freight levels from the last deals ranging $24-30/mt (ME) and Baltic- EA, $77/mt.