Managing Planning and Development of Citie- 26-2-24.docx
Ukraine Crisis Webinar Series Session- XII
1. The Russia-Ukraine Conflict: Impacts on Commodity Markets in Mozambique
Dr. Greenwell Matchaya
Senior Researcher, ReSAKSS -ESA Regional Coordinator,
IWMI
Email: g.matchaya@cgiar.org
14 March 2023
3. • The numerous interconnections among nations through trade, politics, business, infrastructure, culture, etc
mean that what may look like a distant event can have significant repercussions far and wide.
• It is therefore no surprise that the effects of the Russia-Ukraine conflict are being felt beyond the borders of
the warring countries.
• Russia and Ukraine are key exporters of many agricultural products, including sunflower oil and seed, wheat,
barley, and maize.
• Jointly, the two countries account for 27% of global wheat trade, and 23%, and 14% of barley and maize
trade respectively
• Beyond Russia and Ukraine, these impacts of the Russia-Ukraine crisis are felt in the following ways:
• Firstly, countries that trade directly with Russia and Ukraine in food and other commodities that must be
transported through ports near the epicenter of the conflict experience the effects quickly and directly as trade
volumes from the warring countries decline.
Introduction
4. • Secondly, countries that do not trade directly with Russia and Ukraine but trade with others that buy commodities
from the two countries would also be affected indirectly through that linkage.
•
• Thirdly, due to concerns about immediate food shortages, countries (regardless of whether they trade with these
countries or not) often resort to hoarding their food stocks instead of making them available to the market.
• Fourthly, increasing fuel, transport and general trade transaction costs put pressure on commodity prices,
leading to price hikes.
For net importers, import prices increase more than export prices leading to poor Terms of Trade and further
ramifications through negative trade balance
• The Russia-Ukraine war has therefore destabilized global food and other agricultural value chains.
• This may worsen the longer and more intensely the war is fought.
• Timely studies on possible effects can be very useful in directing interventions
5. • Table 1: Changes in World Market prices of selected commodities
• Source: Authors with World Bank 2022 data; bbl stands for barrel of oil; mmbtu stands for Metric Million British Thermal Unit, MT stands for Metric ton
• Sun flower oil, wheat, respectively, and crude oil rose the most (>30%),
• Followed by maize and liquefied natural gas (>12%)
Crude oil,
average
Liquefied
natural gas,
Japan
Maize Rice, Thai
A.1
Wheat,
US
Beef Sugar,
world
Sunflower
oil
($/bbl) ($/mmbtu) ($/mt) ($/mt) ($/mt) ($/kg) ($/kg) ($/mt)
%changes
(t- t_1)
% % % % % % % %
2022Jan
2022Feb 11,5 1,7 5,8 0,7 4,3 4,0 -2,0 6,2
2022March 20,2 1,1 14,7 0,3 24,5 0,6 6,7 57,5
2022April -8,0 7,8 3,8 0,5 1,8 -1,9 3,2 -3,6
2022May 6,5 1,5 -1,0 8,3 5,5 -0,8 -1,1 -8,6
Total
change
30,1 12,1 23,3 9,7 36,2 1,9 6,8 51,4
6. Objectives and Methods
The objectives of this brief were to:
• Analyse price trends for selected commodities in local markets of Mozambique
• Draw insights that may be useful for limiting the impacts of Russia-Ukraine war on livelihoods
• The brief uses
• Data from Mozambique’s market information system, the World Bank
• Perform analysis of changes over time and compare same to changes on world markets.
• This presentation included supplemental results with new data and uses SARIMA techniques and compares
findings
7. • Figure 1: Domestic and International Wheat Prices
(Jan-May 2022)
Results
• Mozambique is a net importer of wheat, with about 40%
being sourced from Russia and Ukraine
• Wheat flour prices increased in April and May of 2022
• - price effect of supply reduction > price effect of
demand reduction
• Combined average increase of 30% over the period (for Tete
and Inhambane markets).
• This increase is similar to the reported increase of 36% for
world markets (Table 1)
• The increase was more in Rural Tete than in Urban
Inhambane, likely because
• wheat is generally imported, first to urban centres
• High transaction costs (fuel related) of rural markets
access led to higher price increases in rural areas.
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Fig 1. Wheat prices in rural and urban markets
Wheat flour Tete Wheat flour Inhambane World Wheat price
8. Figure 2. Sugar Prices in Urban and Rural Markets, (Jan-May 2022) • Mozambique is a net sugar exporter .
• Sugar prices were stable in pre-crisis period
• But became volatile and generally increased after the
onset of the war. –
• Price effect of world supply reduction > price effect
of demand reduction
• Sugar prices normally lower in urban than in rural
markets (Tete, and Marrupula) due to high transaction
costs in rural markets
• This worsened during the war period. The average price
increase in Maputo was under 7% compared to 11% for
rural Tete
• These increases were comparable to the sugar world
price increase of 6.8%
• It is possible that the global scarcity pushed sugar prices
in Mozambique upwards
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Fig. 2. Sugar price
Sugar Marrupula Sugar Tete Sugar Inhambane Sugar Maputo World Sugar price
9. Figure 3: Rice prices in Mozambique’s Urban and Rural
Markets, (Jan-May 2022) • Mozambique is a net importer of rice but it does not
import from Russia nor Ukraine
• Before the war, rice prices were higher in rural Tete
than in Urban Inhambane markets
• Generally, prices of rice declined after the third week
of March 2022 in both markets- perhaps due to
substitution to maize based dishes?
• This trend changed towards end of April 2022 when
the urban prices increased.
• Rural markets supply difficulties may explain the price
differences- its easier to supply urban markets where
good transport systems exist.
• The increase in urban prices in May could reflect that
the scarcity created by the war was taking further
effect for the import the dependent urban markets
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Meticals/KG
Fig.3. Rice prices
Rice Tete Rice Inhambane
10. • Figure 4: Red Meat Prices across Urban and Rural Markets, (Jan-May
2022) • On the world market, beef prices barely changed
(+1.9%) during the onset of the war
• Similarly prices for beef remained almost
constant in rural markets of Mozambique
• And although higher, they declined in urban
markets of Maputo
• The generally higher urban beef prices than rural
prices is due to high incomes and import
dependency in urban markets
• The decline in urban prices may reflect declining
urban demand as incomes plummeted due to
war effects…
• The modest changes in beef prices both in rural
and urban ~ consistent with the low changes in
world prices
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Fig 4. Red meat prices
Red meat Tete Red meat Maputo
11. • Figure 5: Cooking Oil Prices across Urban and
Rural Markets, (Jan-May 2022)
• Cooking oils are generally vegetable based .
• World prices of sunflower increased by at least 51% in the
early days of the war
• Russia and Ukraine, together controlled more than 75% of
sunflower oil trade
• Mozambique is a net importer of cooking oils
• In rural marrupula cooking oil prices rose more (40%),
after the war than in urban Inhambane (7%)
• The switch may imply that cooking oil became more
scarce in rural markets as urban demand monopolized
stocks- reflecting high transaction costs
• The increase in cooking oil prices in both markets
primarily resulted from the Russia-Ukraine conflict.
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Figure 5. cooking oil prices
Cooking oil Marrupula Cooking oil Inhambane
12. Figure 6: Energy Price Trends in Mozambique during
the Russia-Ukraine Crisis (Jan-May 2022)
• Prices for petrol, cooking gas and diesel did not show
any significant differences across the various markets
over most of the entire period and so for this reason
• This is partly because the prices are usually set by the
energy regulator
• Energy prices increased in line with world market prices
see Table 2
• Mozambique is rapidly becoming a significant energy
exporter
• Mozambique is a net exporter of energy to countries in
the Southern African Power Pool (SAPP) – with SA as the
largest energy importer
• The final effect of the price increase may depend on
what Mozambique does with energy bonanza
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Figure 6. energy prices
Cooking gas Marrupula Petrol Marrupula Diesel Marrupula
13. • Table 2: Changes in Local and World Market Prices for Selected Commodities (Jan-May 2022)
• World prices for all commodities rose
significantly
• Apart from rice and maize prices , all
the other commodity prices increased
in tandem with world prices
Commodity Global price change
(%)
Change in local rural
market (Marrupula)
Change in local urban
market (Inhambane)
Maize +23.3% +2.7% 0
Wheat +36.2% +45% +4%
Sugar +6.8% +7% +11.3%
Rice +9.7% 0 -13%
cooking oil +51.4% +26.2% +34.4%
Beef (red meat) +1.9% 0 +0.9%
Fuel Crude Oil- +30.1% Diesel- +26.7%
Petrol-+ 19%
Diesel-+27.3%
Petrol- +19.2%
Liquefied natural
gas (Japan)
+12.1% +11.2% +8.4%
14. • Figure 7: Price Changes in Rural and Urban
Markets (Jan-May 2022)
• Prices of commodities increased in both rural
and urban markets
• Prices of all commodities in the rural markets
generally increased more with exception of rice
and red meat.
• By May 2022, 70% of rural markets were facing
increasing prices , as compared with 60% in
urban markets
• Rural areas of Mozambique hit harder by the
war
• Costs of fuel/transport, restricted rural supply
0%
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Feb Mar Apr May All Feb Mar Apr May All
Rural primary markets
Rising prices Declining prices
Urban Markets
15. Figure 8.Predicted vs Observed wheat Prices in Tete
• Observed prices for 2022 deviated from what would have been predicted under normal trends
• Prices increased after Jan 2022
• Increased more compared to the
Covid-19 only scenario- because
Covid-19 had price reduction effects
in Mozambique
• The RUK war led to larger wheat
price increases relative to expected
prices
Price Impacts
• Covid-19 Impact= C-B <0
• Ukraine+Covid-19 impact=O-B>0
• Ukraine War Impact=O-C>0
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2019m11
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WheatflourTete p_WheatTeteNoCovNoRUK p_wheatflourTeteNoRUK_BUT COVID
O= Observed
B =
Normal
- if No
RUK, no
Covid-
C= if Covid-19
only
16. Key Messages
• The Russia-Ukraine war presents a challenge to global food security and household resilience
• Through direct and indirect pathways, prices of commodities examined, including wheat, sugar, cooking
oil and crude oils were also affected.
• Through the scarcity created and the impacts on terms of trade of commodities, the Russia-Ukraine war
affected prices for commodities in local markets in Mozambique
• These impacts are not uniform across commodities, locations and likely sectors
• The fuel shock induced food price increases in rural areas due to high transaction costs, but for some
commodities (rice), the impacts on incomes led to declining demand and thus prices
• For the design of appropriate interventions, understanding the heterogeneous nature of the impacts of
these crises is important.
17. • In respect of the results, it would be crucial to enhance social protection by developing and strengthening
programs that support consumers and vulnerable households /providing safety nets
• Enhance intra-regional trade to minimize the impacts of the crisis on prices. Trade bans should be
avoided
• Can learn from own and others’ Covid-19 pandemic responses.
• Looking ahead;
• increasing funding to agriculture,
• increasing diversification of value chains, including wheat production eg in Niassa province
• improving investment prioritization within the sector (irrigation, technology, agri-business, extension
etc),
• and avoiding pilferage of its resources can increase productivity and improve the dynamic resilience
of Mozambique households.
• In Mozambique, improving redistribution of gains from the sugar, and energy sectors in Mozambique can
reduce the impacts of the crises in the general population
18. Some Actions underway by the Mozambique Government
• They appear to have resolved to work with IIAM to revitalize wheat production in the country with
emphasis on Niassa province where potential is highest
Policy Measures:
I. Agriculture
• Exemption/reduction from payment of VAT on organic seeds, insecticides, pesticides, fungicides;
• Exemption from vat payment for some agricultural machinery and apparatus for the preparation of land;
• Reduction in the vat payment of fertilizers to 2.5%;
II. Livestock:
• Increase the national production of major mandatory vaccines for animals, namely Newcastle, Asthmatic and
symptomatic carbuncles;
• Enhance national production of feed with locally produced raw material, such as soybeans and corn,
• Subsidised companies producing fertile eggs for the national production of one-day chicks.