Overall market risk: As per World Bank’s assessment, most economies are anticipated to experience sluggish growth this year. This can be attributed to tight monetary measures, constrictive financial conditions, and uncertain global trade dynamics. Moreover, persistent inflation, recent conflicts like those in the Middle East, and climate-related catastrophes have exacerbated these challenges. In response, Central banks across East Africa are implementing varying interest rate policies to shield fragile economies from the adverse effects of inflation, currency devaluation, and disruptions in global supply chains. This indicates a potential departure from the previously coordinated monetary policy approach adopted by banking authorities worldwide to mitigate the escalating prices of goods and services. In the fertilizer market, these factors have disrupted trade routes originally reliant on the Suez Canal, leading to a redirection towards the southern tip of Africa. Consequently, there has been a surge in freight costs and delays in cargo delivery. Transit times have extended dramatically from the typical 18-20 days to 40-45 days at best, as a result of the shift towards the Cape route.
Availability and Affordability: Fertilizer demand in East Africa is on the rise as the main planting season begins. Agroshops are actively managing their inventory levels to ensure they can meet the demand from farmers. In Kenya, the government has reassured farmers of the availability of subsidized fertilizers despite reported shortages. However, only a fraction of the government’s allocated 175,000 metric tons has been delivered. One Acre Fund, a social enterprise, is also reported to be in the process of procuring various fertilizers for Kenya and Tanzania. In Rwanda, the 2024 season B is currently underway. In areas where planting has not yet started, farmers are busy preparing their land. Agrodealers are stocking up and distributing fertilizers through the Smart Nkunganire System (SNS).
In Ethiopia, ongoing insecurity has disrupted the transport and supply of fertilizers. Persistent issues with late delivery have led to the emergence of “black market” channels for fertilizer supply. In Southern Africa, fertilizer demand is declining as the planting season ends. In Malawi, preparations for the winter cropping season are set to begin shortly after the harvest of crops planted during the rainy season. However, the shortage of forex remains a challenge. In Mozambique, a potential shortage is anticipated, leading to a price increase in Urea as importers seek the product in the international market. Zimbabwe is also facing a challenging situation with moderate to low inventories reported at retail outlets, primarily due to harsh macroeconomic conditions, high borrowing interest rates, and cash flow constraints. In contrast, South Africa is reported to have comfortable inventory positions due to significant carryover inventories from the previous season.
Distribution: Most countries are reporting normalcy at the ports and border points. Due to the Red Sea Crisis, African ports in Sudan, Eritrea, Djibouti, and Somaliland are facing challenges with decreased vessel availability, leading to significantly increased freight costs and insurance premiums, negatively impacting their maritime trade.