Overall market risk:
According to the 2023 East Africa Economic Outlook by the African Development Bank, East Africa is projected to have the strongest economic performance in Africa for 2023 and 2024, with growth rates surpassing five percent. Despite this positive outlook, there are potential risks to the region’s economy, both from external factors like a global economic slowdown, rising commodity prices, and international trade policies, as well as domestic issues like the continued Russian invasion of Ukraine, tightening global financial conditions, and exchange rate depreciation. On food security, although drought conditions eased in the region, production prospects remain unfavourable in 2023. Erratic rains are impairing 2023 production prospects, following two successive years of widespread drought that had a devastating impact on food security, which is further weakened by conflicts. 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. In Zimbabwe, big farmers are holding on to their crops and only selling enough for working capital requirements citing that the price is not viable. The currency risk continues to be a hindrance to agriculture and productivity across all sectors. According to FAO’s Agricultural Stress Index (ASI), in several districts of Tanzania, before the start of harvesting operations, between 35 and 70 percent of cropland was affected by severe drought, with likely substantial crop production shortfalls.
In the fertilizer sector, despite the ongoing Russia-Ukraine war, fertilizer prices have significantly dropped in recent months. This decline can be attributed to the reduced costs of raw material inputs like natural gas, urea, and ammonia. The global economy has been able to adapt to the disruptions caused by the war by seeking alternative sources for natural gas and other materials.
Availability and Affordability: Overall, the fertilizer market faces greater risks related to fiscal factors like currency devaluation and operational challenges, rather than issues concerning availability.
Based on the stock report compiled by the Fertilizer Association of Malawi for July, the major suppliers in the country have around 100,000MT of NPK and Urea fertilizers available for the commercial market. This marks a slight increase from the previous month’s report, which indicated a stock of approximately 70,000MT in June. As of July, Tanzania reported that its national requirement has already been met at 148% in the period Jul 2022- Jul 2023. In Kenya, KTDA is heard to have restarted its awarding process of about 91, 000 MT of NPK 26-5-5. In South Africa, increased demand for MOP is being observed as global prices present a stable to soft outlook in the short term. In Zimbabwe, the holding stock in retail outlets remained moderate to low. Farmers are also unable and unwilling to go in and borrow from the schemes at the revised concessionary interest rate of 75% being offered on the commercial schemes. In Mozambique, fertilizer demand is low as farmers are almost done harvesting. In Zambia, suppliers have continued to steadily buildup their stock positions for Urea, D Compound as well as other blends for the winter commercial crop and the main upcoming farming season. In Rwanda, for this 2024A season, there has been an increase in the number of fertilizer supply companies from 4 to 5. So far, 55,000 MT of fertilizers has been imported representing 55% of annual consumption. In Ethiopia, EABC continues to cover more quantities under its annual buy tender 2022/23 with about 81% covered.
Distribution: No major issues have been reported at the ports and border posts in most countries. In July, certain regions of Kenya experienced anti-government protests that led to disruptions in transportation. However, this did not really affect the distribution of fertilizers. The demand for logistics providers into Zambia from Beira in July has risen. The estimated time of transit of commodities out of Beira and Dar-Es-Salaam stood at an average of 5 working days in July. Ethiopia has made deliberate efforts to distribute fertilizers to the civil strife affected Northern region.