High fertiliser prices behind food shortages

Prof Simon Roberts and economist Ntombifuthi Tshabalala of the Centre for Competition, Regulation and Economic Development at the University of Johannesburg, consider the implications of an increase in global fertiliser prices for food security on the African continent.

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Global fertiliser suppliers have made incredibly high profits in 2022/23 on the back of price spikes attributed to the Russia-Ukraine war. The profits of the world’s top nine producers trebled in 2022 from two years previously.

The margins and impacts have been even greater on fertiliser supplies to African farmers. Moreover, the super-high profit margins are being sustained in 2023 in many African countries even while international prices have come down. The harvest season has recently come to an end in most countries in Southern Africa, with farmer margins and production being squeezed by high input costs.

The wide gaps between fertiliser prices in the region and international fertiliser prices point to major issues within the supply chain, with excess margins of some 30% to 80% being earned on sales to many African countries.

South Africa has the benefit of robust competition enforcement, meaning prices in this country have come down substantially. This only serves to highlight the disadvantage being faced by farmers in other countries such as Malawi and Zambia. High fertiliser prices undermine production, contribute to high food prices, and exacerbate food insecurity.

AFRICAN FARMERS CUTTING BACK ON FERTILISER USE

Our work on fertiliser and agri-food markets in the African Market Observatory points to major problems with how international and regional markets work, including the market power of large international suppliers. High prices for fertiliser inputs are squeezing African farmers, who are cutting back on fertiliser use, leading to low yields and supply, and high food prices. International action is therefore urgently required on fertiliser prices to improve food security in Africa.