Food prices in Namibia are anticipated to soar due to threatening weather conditions that will likely negatively impact agricultural production, further exacerbated by the high importation of products, experts have warned.
According to Simonis Storm’s latest Agricultural monthly report, across the globe, meteorologists predict that the upcoming El Niño cycle will likely be the costliest, further heightening the risk of stagflation representing low growth and high inflation.
“The World Meteorological Organisation reports a 98% probability that the combination of greenhouse gases and the return of El Niño will make the next five years the warmest on record. While this can have numerous economic effects, the impact on food prices, food production and therefore food security will be most intense,” the research firm said.
Namibia remains reliant on the import of horticulture products which continuously exceed exports and local production, notes the report.
“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,” the report said.
It is further projected that the El Niño weather conditions, characterised by projected heatwaves, droughts, and severe storms, are expected to increase farmgate prices.
“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.”
Therefore, due to the 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.
It is anticipated that the expenditure will contribute to inflationary pressures for Namibians and keep food prices expensive. The most recent La Niña cycle of 2020 to 2023 is regarded as the hottest period compared to all El Niño years before 2015.
Meanwhile, the report further noted that price margins between farmgate and retail prices have widened.
“Farmgate prices have outpaced retail prices in recent times, with a more substantial yearly increase. In June 2023, farmgate prices recorded a 20.9% y/y growth on average, while retail prices only saw a modest 11.1% y/y rise.”
“However, compared to the previous month, farmgate prices experienced a 6.8% m/m decline in May. In contrast, retail prices surged by 10.9% m/m during the same period.”
As a result, farmers in the market are discouraged to stay as they are competing with low South African wholesale prices, causing them to make fewer profits and in turn produce less volumes of horticulture.
This poses a barrier to entering the market for local farmers, therefore most farmers are opting to sell their products in the informal market, asserts the report.
