Imported Fertilisers: Key of Food Crisis in Africa

Context: In 2022-23, global fertiliser suppliers witnessed a surge in profits due to price spikes caused by the Russia-Ukraine war. The world’s leading nine producers experienced a threefold increase in profits compared to two years ago.

What is the Issue?

Food insecurity is a pressing concern in the East and Southern Africa region, affecting around 73 million people. The impact is particularly severe on small holder farmers and low-income urban households due to high food prices.

Many African countries heavily depend on food imports.
Drought-hit countries like Kenya face challenges in sourcing enough imports, leading to worsened food security.
Export restrictions on maize by Zambia and Tanzania have affected farmers in those countries by suppressing prices.
Input costs, particularly fertilizer, have increased, adding to the burden on farmers and exacerbating the situation.

Food Insecurity

What is Acute Food Insecurity?	It refers to a situation where a person’s or household’s access to adequate food and nutrition is severely limited, resulting in a high risk of starvation or death.
What is FSIN?	A global initiative co-sponsored by Food and Agriculture Organization (FAO), World Food Programme (WFP), and International Food Policy Research Institute (IFPRI) to strengthen food and nutrition security information systems for producing reliable and accurate data to guide analysis and decision-making.
What is GNAFC?	An alliance of humanitarian and development actors founded by the European Union, FAO, and WFP in 2016 to prevent, prepare for and respond to food crises and support the Sustainable Development Goal to End Hunger (SDG 2)

Fertiliser Price Disparities in Africa

Supply Chain Challenges: Wide gaps between regional and international fertiliser prices indicate issues within the supply chain. Excessive margins of 30%-80% are earned on sales to many African countries.
Advantage in South Africa: South Africa benefits from robust competition enforcement, leading to substantial price reductions in the country. However, this highlights the disadvantage faced by farmers in other nations like Malawi and Zambia.
Impact on Farmers: High fertiliser prices undermine production, contribute to high food prices, and worsen food insecurity.
African Market Observatory: Research on fertiliser and agri-food markets in the African Market Observatory identifies problems in international and regional markets, including the market power of large international suppliers.
Consequences for Farmers: High prices lead African farmers to reduce fertiliser use, resulting in low yields, limited supply, and increased food prices.
Urgent International Action: Urgent international action is required to address the issue of fertiliser prices and improve food security in Africa.

Urea prices in East and Southern Africa. World price is from the World Bank; South African price is inland, from Grain SA. East Africa is the average of Kenya, Rwanda, Tanzania and Uganda. Prices are given before any government subsidies. Source: Compiled from different sources by the African Market Observatory

High Profit Margins Impacting African Farmers

African Farmers Hit Hard: Fertiliser supplies to African farmers have faced significant impacts, with soaring costs affecting agricultural production.
Sustained Profit Margins: Despite international price decreases, super-high profit margins continue to persist in many African countries throughout 2023.
Harvest Season Challenges: The recent end of the harvest season in southern African countries has revealed that elevated input costs are squeezing farmer margins and production.

Low Fertiliser Usage: African countries heavily rely on imported fertiliser, but the usage is relatively low. For instance, Kenya and Zambia use around 70 kg/ha, compared to 365 kg/ha in Brazil.
Squeezed Farmer Margins:The recent end of the harvest season in southern Africa reveals that high input costs affect farmer margins and production.
Impact on Maize Yields: High costs and low application of fertilisers lead to lower maize yields in Zambia, being half of South Africa’s and one-third of Argentina’s yields (according to FAO).
Decline in Imports and Output: In 2022, Kenya imported almost 30% less fertiliser, leading to a 18% decline in maize output compared to the previous five years. Poor rains further exacerbated the situation.
Substantial Deficit and High Prices: The reduced fertiliser imports caused a significant deficit relative to local demand, resulting in very high prices.
Constraints on Production: Continuously high fertiliser prices hinder agricultural production, despite the urgent need to expand output to meet regional demand.
Untapped Potential: Zambia has abundant arable land and water for agriculture, with only a fraction currently under cultivation. With better returns and cheaper input costs, production could increase significantly.

Inequitable Competition

International fertilizer prices doubled between September and November 2021, peaking at $915/t for urea in early 2022.
Higher natural gas prices, a key input for nitrogen-based fertilizer, and supply disruptions due to the Russia-Ukraine war drove the rise.
Fertilizer companies exploited the situation, raising prices beyond the increase in costs.
By March 2023, urea prices fell back to around $300/t internationally.
South Africa’s inland prices reflect fair costs, but in other African countries, excessive profits persist.

What needs to be done?

African governments have implemented fertilizer subsidy programs to mitigate the impact of high prices.
Tanzania’s government subsidy reduced fertilizer prices from $1100/t to $600-700/t.
Subsidies are costly for governments, and many African countries struggle to sustain them effectively.
In Malawi, a large portion of the Affordable Inputs Programme (AIP) beneficiaries didn’t receive fertilizer in 2022/2023.
Better food security in Africa necessitates urgent international action on fertilizer prices.
African competition authorities should investigate potential anti-competitive conduct in the fertilizer market.
Investments in logistics, storage, and advice on optimal usage are necessary.
Establishing a fertilizer market observatory, similar to the EU’s initiative, would provide valuable data and exchange experiences.

Ques 1: What is food security?

Answer: Food security refers to the condition in which all people have physical, social, and economic access to sufficient, safe, and nutritious food to meet their dietary needs and preferences for an active and healthy life.

Ques 2: Why is food security important?

Answer: Food security is essential for the well-being and development of individuals and communities. It ensures that people have access to an adequate and diverse diet, leading to improved health, productivity, and overall quality of life.

Ques 3: How can food security be achieved?

Answer: Various measures can achieve food security, including increasing agricultural productivity, promoting sustainable farming practices, enhancing market access, improving storage and distribution systems, implementing effective social safety nets, and addressing poverty and inequality.

Imported Fertilisers: Key of Food Crisis in Africa,Imported Fertilisers: Key of Food Crisis in Africa