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Global Surge in Wheat Prices Moves African Food Producers to source for Cheaper Alternatives

Rate Captain by Rate Captain
May 9, 2022
in Commodities
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Global Surge in Wheat Prices Moves African Food Producers to source for Cheaper Alternatives
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Africa’s dependence on foreign wheat imports to meet the growing wheat consumption is facing the biggest challenge due to the Russian-Ukraine conflict as prices have spiked by about 40% as compared to last year.

This has steered food producers in most African countries to shift to cheaper alternatives in the production of bread, pastries, and pasta. As these food producers mentioned that the local rice, manioc flour, and sorghum act as substitutes for wheat.

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Kenya’s import accounts for about 44% of Ukraine’s production and surging prices have helped to the spike inflation rate in the country to 6.5% in April. The food producers in Kenya, such as Unga the  Group Plc, the Nairobi-based maker of Exe brand wheat flour and Jagoo maize flour, are beginning to source cheaper alternatives from the Amana line of rice and pulses.

The Managing Director of Amana line of rice and pulses, Joseph Choge has said that “The price of maize and wheat is driving consumers to other alternatives, thus, pulses and rice sales are growing.”

He added that “The farm-gate price of corn has doubled, and millers are struggling to get enough supplies.”

According to Bloomberg reports, the global supply of wheat is expected to shrink even further as India considers restricting exports after severe heatwaves damage crops.

This is coming after India slashed their production for this season saying that there’s enough supply to meet domestic demand.

Therefore, the United Nations, Food and Agriculture Organization has cut its outlook for global wheat production, saying the forecast for Ukraine remained below average as the war is likely to reduce the harvested area by at least a half.

Similarly, Egypt is the biggest buyer of wheat, with more than 80% of imports coming from Ukraine, and Russia is now running 13% behind last year on government purchases.

With this kind of demand pressure, the General Manager of the pasta-maker Egyptian Swiss Group, Ahmed El-Sebale has said that the company is now experimenting with new recipes using rice, corn, and lentil flour.

In Nigeria, Nestle Nigeria Plc, the maker of Golden Morn cereal is introducing more locally produced crops into its lineup such as; sorghum and soybeans, as stated in its company’s annual report for 2021.

In other African countries such as Congo, the government approved a program supporting the production of manioc flour to make bread and pastries, to reduce its dependence on imported wheat, which costs about $87 million a year.

The Deputy Chief of Staff for economic issues, Andre Wameso, has made an agreement statement to the Congo’s government initiative, as he stated that, “if the majority of these products are grown on the ground, the suffering from Ukrainian crisis will be lessened.”

Cameroon, which imports about 1 million tons of wheat annually has resulted in the use of potatoes in the production of bread and other pastries after the government raised the price of bread by 20% following a deficient supply of wheat from Ukraine. A farmer in the Northwest town of Santa in Cameroon has responded according as he mentioned that the demand for Irish potatoes has increased tremendously and he is even planning to acquire more farmland to plant more potatoes to meet up with the demand. He went further to say that the seven tons of potatoes he produced this year have been cleared.

Keynotes

Russia’s invasion of Ukraine has disrupted agricultural production and trade from one of the world’s major food-exporting regions. Particularly affected in the Middle East and North Africa region. These Arab countries consume the highest wheat per capita, about 128 kg of wheat per capita, which is twice the world average. More than half of this comes from Russia and Ukraine.

In Nigeria, the USDA said that the wheat demand could reach 6.5 million metric tons this year, which is, 13% more than in 2021.

The demand pressures in Nigeria are driven by foreign exchange scarcity that leads flour millers to buy dollars at 20% higher than the central bank’s rate and the increasing cost of freight for imports.

Wheat prices have recorded growth by about 157.12% to hit 415.25 an ounce in 2022 from 167.50 an ounce in 2017, following the Russian invasion of Ukraine.

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