The U.S. Budget and Economic Outlook (Presentation)
Ukraine Crisis Webinar Series-Session XVI
1. The Russia-Ukraine Conflict: Impacts on Commodity Markets in Zimbabwe
Dr. Greenwell Matchaya
Senior Researcher, ReSAKSS -ESA Regional Lead, IWMI
Email: g.matchaya@cgiar.org
18 April 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 Zimbabwe
• Draw insights that may be useful for limiting the impacts of Russia-Ukraine war on livelihoods
• The brief uses
• Data from Zimbabwe’s market information system, the World Bank
• Perform analysis of changes over time and compare same to changes on world markets.
• Difference in difference calculations are also included for one market where data were available, to confirm
the uniqueness of changes in 2022
7. • Figure 1: Zimbabwe Wheat Imports (2019)
Results
• Zimbabwe is a net importer of wheat
• In 2019, wheat imports primarily originated from South
Africa (38,000 MT or
• 30% of the total), the United Kingdom (24.5%), Russia and
Ukraine (22%), Germany, Canada, the United
• States and Belgium (all contributing a total of 22% )
• The ware in Ukraine therefore may affect prices in
Zimbabwe
0.0
5000.0
10000.0
15000.0
20000.0
25000.0
30000.0
35000.0
40000.0
South Africa United
Kingdom
Ukraine Germany Canada United
States
Russian
Federation
Belgium
Metric
Tons
(MT)
8. Figure 2. Wheat Prices in Urban and Rural Markets, (Jan-May 2022) • wheat prices were highest in the urban markets of
Renkini and Mbare, where they averaged around
• USD1.4/KG,
• and were lowest in the rural markets of Chipingwe and
Hwedza.
• After the second week of April 2022, wheat prices swung
upwards, with the most significant increases observed in
urban markets eg Renkini and Mbare.
• This may be explained by the high incomes and import
dependency of urban markets
• Prices in the urban markets rose by above 34% as
compared to an increase of above 25% in rural markets
• These increases are comparable to average changes of
36,2% observed on the world market
• The war may thus have affected the prices of wheat in
Zimbabwe
0
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3
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Jan Jan Jan Jan Jan Feb Feb Feb Feb Mar Mar Mar Mar Mar Apr Apr Apr Apr Apr May May May May May
USD/KG
Wheat flour Mbare Wheat flour Renkini Wheat flour Hwedza
Wheat flour Chipinge World Wheat Price
9. Figure 3: Sugar Prices in Urban and Rural markets of Zimbabwe,
(Jan-May 2022) • Zimbabwe is a net sugar exporter with a
• trade surplus of over 73 million USD in 2020.
• Sugar prices were generally higher in the urban
markets of Mbare and Renkini than in the rural
markets of Hwedza and Chipingwe.
• The average price in the urban markets before week 5
of March 2022 was USD1.84/KG compared to just
under USD1.2/KG for the Chipinge and Hwedza rural
markets.
• The average price increases in urban and rural
markets over the period was 17%
• The sugar price increases in exporting countries such
as Zimbabwe were likely due to increased international
demand for sugar as other exporters hoarded their
supplies
0
0.5
1
1.5
2
2.5
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Jan Jan Jan Jan Jan Feb Feb Feb Feb Mar Mar Mar Mar Mar Apr Apr Apr Apr Apr May May May May May
US$
per
KG
Sugar Mbare Sugar Chipinge Sugar Hwedza Sugar Renkini World Sugar Price
10. • Figure 4: Rice and Maize Prices across Urban and Rural Markets, (Jan-
May 2022) • Zimbabwe is a net importer of maize and rice.
• Neither of the two commodities is imported from
Russia or Ukraine, so any war effect on these
commodities would only be indirect.
• Globally prices for maize and rice rose by 23%
and 9.7% respectively due to the Ukraine crisis.
• In Zimbabwe, maize prices rose in both urban
and rural markets
• Although the big maize price jump in week 5 of
March in Hwedza is surprising, the general
increase may be linked to the Ukraine crise
• The decline in rice prices in both rural and urban
markets may be due to the onset of rice harvests
(March to June) in Zimbabwe and neighboring
countries including Malawi
0
0.2
0.4
0.6
0.8
1
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1.4
1.6
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2
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Jan Jan Jan Jan Jan Feb Feb Feb Feb Mar Mar Mar Mar Mar Apr Apr Apr Apr Apr May May May May May
USD
per
KG
Rice Renkini Maize Renkini Rice Hwedza Maize Hwedza
11. • Figure 5: Red Meat Prices across Urban and Rural
Markets, (Jan-May 2022)
• Red meat is generally expensive in Zimbabwe, averaging
above USD10/KG in Mbare market, above USD7.40/KG in
Chipinge market and above USD4/KG in the rest of the
markets.
• The relatively higher prices in the urban market of urban
Mbare may be the result of higher incomes and the
general import dependency of urban markets.
• Red meat prices underwent a brief period of volatility but
generally declined at the end of the study period.
• These trends mimic those on the world stage.
• On the world stage, after a brief rise from USD4.97/KG in
January to USD6.25 in March 2022, beef prices
subsequently declined to just around USD6.08/KG in May
2022
0
2
4
6
8
10
12
14
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Jan Jan Jan Jan Jan Feb Feb Feb Feb Mar Mar Mar Mar Mar Apr Apr Apr Apr Apr MayMayMayMayMay
USD
per
KG
Red meat Mbare Red meat Chipinge Red meat Renkini Red meat Hwedza
12. Figure 6: Cooking Oil Prices across Urban and Rural
Markets, (Jan-May 2022)
• cooking oil prices were higher in the urban market of
Mbare, where a litre was sold at around USD3.50 and
lower in the rural market of Chipinge, where prices
averaged around USD2.49 per litre.
• Cooking oil prices increased after Week 4 of February
2022 from USD3/L to a peak of USD4.40/L in the second
week of May 2022 (47%)
• In contrast, cooking oil prices in Chipinge increased from
USD2.25/L in the second week of March to a peak of
USD2.60/L (ie by 16%) over the same period
• The urban –rural differences in price increase may be
due to high incomes in urban markets
• The price increases over the period under study were
similar to those on the world stage where prices
increased by 51% over the period.
• Thus, the price change were greatly influenced by the
Ukraine crisis.
0
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Jan Jan Jan Jan Jan Feb Feb Feb Feb Mar Mar Mar Mar Mar Apr Apr Apr Apr Apr May May May May May
USD/L
Cooking oil Mbare Cooking oil Chipinge
13. • Figure 7: Energy Prices across Urban and Rural Markets,
(Jan-May 2022)
• After the initial price volatility in urban market of Mbare,
Petrol prices did not show significant suddent changes by
market and between markets after March 2022
• The stability observed over the period despite reduced
international supplies and rising prices can partly be
attributed to Zimbabwe's domestic policy.
• Zimbabwe subsidized fuels to limit negative impacts on
livelihoods. For example, by March 2022, the Treasury
reduced the fuel levy from 12,7 US cents per litre to 11,4
US cents
• Any fuel increases were programmed to be small each
time to avoid significant negative impacts on consumers
and the economy.
• Should still be noted that from March to May the prices
increased steadily by about 22% in Mbare and 18% in
Chipinge. The increase is attributable to Ukaraine crisis
0
0.5
1
1.5
2
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3
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Jan Jan Jan Jan Jan Feb Feb Feb Feb MarMarMarMarMar Apr Apr Apr Apr Apr MayMayMayMayMay
US$/L
Petrol Mbare Petrol Chipinge
14. • Table 2: Changes in Local and World Market Prices for Selected Commodities (Jan-May 2022)
• World prices for all commodities rose
significantly
• Most commodity prices increased in
tandem with world prices
• Prices in urban markets increased
more
Commodity Global price
change (%)
Change in local
rural market
(Chipinge)
Change in local
urban market
(Mbare)
Maize +23.3% -4% +67%
Wheat +36.2% +24.9% +26.3%
Sugar +6.8% +0.7% +17%
Rice) +9.7% +14.5% -17%
Cooking oil +51.4% +14% +33.3%
Beef (red meat) +1.9% -0.4% +8.1%
Fuel Crude Oil: +30.1% Diesel: 14%
Petrol: 18.4%
Diesel: +22%
Petrol: +22.%
Liquefied natural
gas (Japan)
+12.1% +21.3% +33.7%
15. • Figure 8: Price Changes in Rural and Urban Markets
• Prices of commodities increased in both rural
and urban markets
• By February 2022, more than 70% of the urban
markets were experiencing price increases
compared to just under 60% of rural markets.
• Similarly, the number of markets with
increasing prices declined to under 50% in
March, while close to 80% of the urban
markets continued to experience price
increases.
• Urban areas of Zimbabwe hit harder by the war
• Scarcity, high incomes and import dependency
of urban centers drove the difference
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Feb Mar Apr May Feb Mar Apr May
Rural Primary Markets
Rising prices Declining prices
Urban Markets
16. • Figure 9: Comparison of price changes (%) in 2017 vs 2022 • To understand if some of these price changes are
indeed different from usual patterns
• Calculate price changes from one month to
another for 2022
• Find another year considered normal
without known events
• Used 2017 partly due to availability of data
• Comparing differences across months for
the two years,
• Its clear that changes in 2022 were
• Large
• Generally positive
• Provides some evidence that those large
changes were not normal, but perhaps
influenced by Ukraine crisis.
Diff 2017 Diff 2022 DID (2022-2017)
January - - -
February 2,94 22,38 19,44
March 5,71 -9,14 -14,86
April -2,70 28,30 31,00
May -5,56 26,14 31,69
Overall 1,98 13,85 11,86
17. 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 Zimbabwe
• These impacts are not uniform across commodities, locations and likely sectors
• For the design of appropriate interventions, understanding the heterogeneous nature of the impacts of
these crises is important.
18. • It is 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 to increase productivity
• increasing diversification of value chains, including maize and wheat
• Improving redistribution of gains from the mining sector in Zimbabwe can reduce the impacts of the crises
in the general population
19. Some Actions underway by the Zimbabwe Government
Zimbabwe switching on Russia to substitute commodities that were supplied by
Ukraine https://www.voanews.com/a/zimbabwe-leaning-to-russia-as-others-shun-moscow-for-invading-ukraine-
/6608224.html
Increased interest rates to tame inflation partly resulting from the
war https://www.africanews.com/2022/04/05/zimbabwe-interest-rate-at-all-time-high-as-russia-ukraine-war-forces-
policy-measures//
To reduce fuel prices Zimbabwe has reintroduced the mandatory blending of fuel with ethanol produced locally.
https://www.africanews.com/2022/06/01/fuel-hikes-in-africa-driven-by-russia-ukraine-war//
The government also reduced the fuel levy from 12,7 US cents per litre to 11,4 US cents to reduce pressure on traders
to increase fuel prices.
https://allafrica.com/stories/202203210428.html
The government is working on supporting some companies with facilitation of capex funding and review of duty on
raw materials that are subject to duty. ( Interview with Mr Chamuka , Zimbabwe Fertilizer Company (ZFC) )
https://zimcodd.org/wp-content/uploads/2022/03/Russia-Ukraine-Conflict_Economic-Implications-for-
Zimbabwe.pdf