Agriculture input costs surge
The Namibia Agriculture Union’s (NAU’s) quarterly review said global commodity markets, particularly prices of feed, fertilisers, oils and energy, are crucial for Namibia’s agriculture sector, as it is highly dependent on their imports.
According to the union, the global markets for oil and energy, such as gas, coal and electricity, are struggling, and net energy importers, including Namibia, are very vulnerable.
It said that recent updates have shown that energy prices have increased to their highest level in decades.
"Crude oil prices soared by over 40% in June 2022 (US$108.76 per barrel) from their June 2021 levels (US$ 73.84 per barrel)."
NAU added that the Russia-Ukraine conflict has been identified as both a price shocker and an exposer of existing underlying supply-side bottlenecks.
"The decline in investments in oil and natural gas and a slight tilt towards renewable energy negatively affected the supply of oil and energy."
The union says, meanwhile, the demand for energy and oil increased due to the post-Covid-19 global economic recovery and the cold and long winters in the northern hemisphere.
"Hence the elevated oil and energy prices, which we see being reflected in our domestic market."
It said that for the third quarter of 2022, oil and energy prices are expected to remain elevated due to a combination of continuous supply shortages and strong demand.
"Therefore, Namibian prices are expected to remain high even during the third quarter of this year."
Fertilisers, feeds and licks
The NAU said urea prices have remained high since the Covid-19 period and have been sustained by the disruption in supply due to the Russia-Ukraine conflict.
"With some of the biggest producers having suspended exports until May 2022, the impact is seen in the year-on-year price surge locally and in South Africa, where prices spiked by 102% in Namibia and 125% in South Africa."
The union says that the market remains volatile and local prices are already indicating an upward trend for the next quarter.
The year-on-year local price of phosphate also increased by more than 50%, from N$9.28/kg in 2021 to N$14.63/kg in 2022.
The NAU says that in the international market it is anticipated that phosphate might have reached its peak and a downward trend should be expected.
"However, the effect of the exchange rate combined with inefficiencies at ports such as Durban and high import costs could keep prices high."
The year-on-year price of yellow maize increased by 34.2% in South Africa, meaning from N$3.4 per kilogram in the second quarter of last year to N$4.4 per kilogram in 2022.
The union says that the surge in the prices of the above inputs explains the increase in feed costs, which is reflected in its latest production cost index.
It said that the livestock sector has seen a drastic increase in agri-inflation since the fourth quarter of 2020, mainly due to the costs of feed, transport, and fuel, plus the depreciation of the Namibian dollar against foreign currencies.
"The drastic increases in input costs intensified the pressure on livestock production, as the agri-inflation increased by 15%, which is the highest in over 10 years. The increase was driven by a massive 53.5% year-on-year increase in fuel prices, a 21.6% year-on-year increase in feed costs, and a 9.2% year-on-year increase in maintenance and fixed improvements."
It added that the livestock feed market has been under strain due to high prices of raw inputs such as yellow maize and soybeans that have also escalated, thus negatively affecting weaner prices.