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Global fertiliser price increases will a cause ripple e...

DM168

MAVERICK INTERVIEW

Global fertiliser price increases will a cause ripple effect and threaten food security – Seelan Gobalsamy, Omnia CEO

Omnia CEO Seelan Gobalsamy. (Photo: Supplied)

The consequences of Russia’s invasion of Ukraine have rippled across the world, affecting geopolitical relations, disrupting supply chains and spiking commodity prices.

Food shortages are another possible consequence. DM168 spoke to Seelan Gobalsamy, CEO of Omnia, which supplies fertiliser to the agriculture industry, to better understand the risks and opportunities for fertiliser suppliers and food producers in southern Africa.

What role does Omnia play in SA’s agriculture and fertiliser market and how big a role player is the company in its respective markets?

Omnia Nutriology is a market leader in agriculture in southern Africa and supplies inputs (fertiliser and speciality products), analytical, advisory and technology solutions.

The division produces granular, liquid and speciality fertilisers and supplies anhydrous ammonia for direct application to the soil. These products are supplied to a broad customer base of farmers and other final users throughout southern Africa.

 How much fertiliser does South Africa import relative to the amount the country produces?

South Africa imports about 80% of fertiliser consumed, some of which is utilised across various SADC [Southern African Development Community] markets.

 If South Africa is a net importer of fertiliser, to what extent is the country affected by current global supply and demand imbalances?

Fertiliser is a key input to the agriculture sector, which contributes significantly to global GDP.

Agriculture secures food security, provides employment and supports livelihoods. Locally, fertiliser can contribute up to 35% of a farmer’s input costs, depending on various circumstances like the crop that is produced and cultivation practices.

The surge in global fertiliser prices has increased concern over food security across sub-Saharan Africa, as all farmers are dependent on imports.

Russia is the second-largest exporter of fertiliser after the US. To what extent is the Russian invasion of Ukraine affecting supply? And what has happened to prices and shipping costs as a result?

The Russia-Ukraine crisis has contributed to the increase in the price of fertiliser globally due to supply and demand dynamics. Global fertiliser supply and demand is finely balanced, and Russia and Ukraine are large producers of fertilisers, thus prices have increased further in the past few months.

The extensive sanctions imposed on Russia could negatively affect Russia’s trading activities and indirectly push fertiliser prices higher than the surge experienced in the past couple of months.

Since January 2021, all our input materials costs have increased: ammonia has gone up by 220%, urea by 148%, diammonium phosphate by 90% and potassium chloride by 198%, compounded by an increase in shipping and other logistics costs.

 Both China and Russia have now put a halt to certain exports, such as ammonia. How will that affect Omnia?

Fortunately, our global supply chain network has allowed us the flexibility not to rely on Russia or Ukraine, placing us in a strong position to mitigate the challenges caused by current supply shortages.

Out of this dark war and the resultant disruption, is there any opportunity for Omnia and other fertiliser producers to increase their production and scale their markets?

It is important that we all work together to protect our agriculture sector to ensure we have an adequate supply of inputs. Omnia has an extensive supply chain network and substantial local manufacturing capabilities that we continuously optimise to meet the demands of our customers.

Our sourcing strategy is diversified, depending on the raw material and available alternatives, which ensures cost competitiveness and reduces seasonal risk.

Additionally, we engage with customers regularly to understand their demand requirements to procure timeously and ensure consistent supply.

We are also able to optimise the key supply of ammonia, which is used for fertiliser and explosives. We have invested in our own infrastructure and bolstered our local and global supply chain and logistics.

There has been much talk about the impact of the war on one of the world’s great breadbaskets. Which commodities are affected, and to what extent is South Africa, and the wider SADC region, affected?

Together, Russia and Ukraine are significant producers of wheat, maize and sunflower oil.

Directly, the potential impact is the uncertainty of supply and increase in commodity prices globally. As the continent is a net importer of food, there will be a subsequent impact on consumer inflation, including food prices.

This may lead to heightened food insecurity across the continent, and the public and private sectors need to collaborate to avoid this potential crisis.

While South Africa will feel the impact of the Russia-Ukraine conflict on food prices, it is also likely to benefit from maize exports. As a net exporter of maize, South Africa imports about 40% of its wheat. And as a result, the short-term impact of the conflict is through price transmission and not the restrictions on the commodities’ availability, therefore shortages are unlikely.

Once again, is there an opportunity for African agricultural producers to scale up to meet supply, and if so, which countries and products stand to benefit?

South Africa is well placed to take advantage of the potential changes as there is production capacity of fertiliser within the country. We know that countries with efficient ports are less affected by supply chain disruptions. Other benefactors will be countries with progressive agriculture policies that continuously adopt modern farming technologies, such as Zambia.

Zambia consistently produces surplus agricultural products that [the country] can export to neighbouring countries when demand increases.

This is where the Omnia Nutriology approach assists farmers to increase yields, [while] conserving scarce resources like nutrients and water. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.

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