Simonis Storm Managing Director Bruce Hansen in a geopolitics report says that food prices in Namibia will continue to spike because of Russia’s invasion of Ukraine.
He says Ukraine is a major producer of agricultural products, particularly sunflower oil, which is one of the basic products used in the majority of households in Namibia.
According to the stock broker, Namibia, as a result of the war can expect to see higher prices in bread, corn, baking flours, honey, beverages in aluminium cans, cheese, cooking oils and many other consumables.
Ukraine also ranks first in Europe in terms of arable land, second in the world in terms of barley production and fourth in terms of global barley exports. It also ranks third in the world by area of black soil and third largest producer of corn. Ukraine is the largest producer of potatoes and fifth biggest producer of rye globally.
He says the country is the largest supplier of honey to Europe and the ninth biggest producer of chicken eggs, enabling the country to meet the food security needs of about 600 million people (8% of the global population).
“Namibia has experienced significant annual price increases in some of the food products in which Ukraine is a large global producer or exporter of. For example, cooking oil prices have increased by 21.4% on average in Namibia in the last year alone. Food production and exportation in Ukraine is likely to be disrupted with the ongoing resistance battle against Russia. This will severely impact global food production and has significant food security risks to North African countries who greatly rely on Ukraine’s food exports,” he said.
According to the report, Ukraine is Egypt’s biggest supplier of corn. “When these North African countries scramble for supplies in tightening soft commodity markets, global food prices will increase even further,” he stated.
The report also suggests that beer prices are likely to go up because of the risks of the disruption in barley production in Ukraine, resulting in beer producing countries looking for alternative supplies of the raw product. “This will increase global prices of barley and lead to higher beer prices. Namibia currently does not have any barley producing operations and therefore remains vulnerable to global barley prices, this could lead to an increase in beer production costs and ultimately higher consumer prices for different beer products,” the report says.
Global barley prices have surged between 29 percent and 67 percent on average during 2021, already providing upward pressure on beer production costs worldwide and locally.
Annual monthly beer inflation has averaged 2.3 percent in the last two years and could rise further depending on lower global supply of barley.
“Barley is also a component of animal feed and could implicate input costs of farmers worldwide, leading to higher livestock prices. Potatoes are also a main export product for Ukraine and besides being a food staple, potatoes are also used to produce white spirits such as vodka. White spirit inflation has averaged 9.8 percent during 2021 and is also likely to see further price increases as a result of higher global vodka prices,” the report further reads.
As a result of the invasion, global oil prices have surged to levels last seen in 2014 and economists now believe that elevated oil prices will derail the pandemic economic recovery in developed countries, who already saw a decrease in economic activity as a result of the Omicron variant and related restrictions.
“Besides South Africa and other African countries, Namibia’s biggest import markets are typically China, Europe and the US, all of whom have downside risks to economic growth due to relying on consumption spending by households to support economic activity. According to a Moody’s report, surging oil prices have been a contributing factor to every recession since World War II and that the odds of a recession in the US have increased from 28 percent to 34 percent This in turn will have spillover effects into other developed economies and could negatively impact Namibia’s exports, limiting growth in sectors reliant on trade with developed countries and foreign currency reserves with Bank of Namibia,” the report says.