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El Niño Expected To Drive Food Prices Up Further

By:Staff writer

Expected El Niño weather conditions are likely to further increase farmgate prices within the horticulture sector.

This is after farmgate prices, the price of goods purchased directly from a farm, without markup added by retailers, have already outpaced retail prices in recent times, and have recorded a more substantial yearly increase.

El Niño weather conditions are generally characterised by projected heatwaves, droughts, and severe storms.

Farmgate prices have already been on the rise. Despite the farmgate prices recording a 6.8% m/m decline in May, they saw a 20.9% y/y growth on average in June, in comparison to retail prices only seeing a 11.1% y/y rise.

“Based on Bloomberg Economics modelling, previous El Niño cycles contributed an additional 3.9 percentage points to global non-energy commodity prices and 3.5 percentage points to global oil prices. Across the globe, meteorologists predict the upcoming El Niño cycle will likely be the costliest, further heightening the risk of stagflation (i.e. low growth and high inflation),” Simonis Storm Securities observed.

They further anticipate that, because of capital expenditure required for borehole drilling and irrigation systems, farmers in Namibia and South Africa will exert upward pressure on prices during this El Niño cycle.

“This expenditure will contribute to inflationary pressures for Namibians and keep food prices expensive. The most recent La Nina cycle (2020 to 2023) was the hottest period compared to all El Niño years before 2015,” the economists said.

In South Africa, the Reserve Bank (SARB) has stated the impact of the El Niño weather conditions could push up consumer inflation in the months ahead and force the bank to raise interest rates once again.

Namibia has historically kept up with SARB’s monetary policy decisions.

According to the World Meteorological Organization, there is a 98% chance that the combination of greenhouse gases and the return of El Niño will make the next five years the warmest on record.

The impact on food production and prices is likely to be the most intense.
“Namibia remains reliant on the import of horticulture products as imports continuously exceed exports and local production. Forecasts point to continued trade deficits as volumes of food imports are forecasted at 13,731 tonnages, compared to 5,505 tonnages in export volume over the next 3-month period (July 2023 to September 2023),” SSS observed.

They further said that competing with South African wholesale prices has caused Namibian farmers to make less profits and, in turn, produce less volumes of horticulture.

“This poses a barrier to enter the market for local farmers, therefore most farmers are opting to sell their products in the informal market.”

Meanwhile, the revenue generated from exporting Namibian fish has risen from N$697 million in May 2022 to N$1.1 billion in May 2023.

This is after the fish export export bill increased for the ninth consecutive month and recorded a 60.2% year-on-year (y/y) increase in May.

Namibia’s fish exports were mostly destined for Europe and SADC member states.

Staff Writer

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