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How Africa risks reeling from a health crisis to a food crisis

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By Libby George

LAGOS (Reuters) – In Nigeria’s Benue state, the food basket of the country, Mercy Yialase sits in front of her idle rice mill. Demand is high across the nation, but she already has mounds of paddy rice that are going nowhere amid the COVID-19 lockdown.

“I can’t mill because the marketers are not coming,” Yialase said, referring to wholesale buyers, as she sat at a market stall in the city of Makurdi with dozens of other millers.

Although food truck drivers are meant to be exempt from lockdown restrictions, many are afraid for their own safety, or fear they will be fined or arrested by overzealous police.

The situation in Nigeria, Africa’s most populous nation, is reflected across sub-Saharan Africa.

Trucking logistics firm Kobo360 said 30% of its fleet across Nigeria, Kenya, Togo, Ghana and Uganda was not operating as a result. Several farmers said crops were rotting in the fields or at the depots waiting for trucks that never arrive. And millers cannot get their milled rice to buyers.

“There is no clarity around what can move around … or what is essential transportation,” said Kobo360 co-founder Ife Oyedele, adding that truck bosses were afraid. “They’re scared to go out and have their drivers on the road.”

Millions of people in the region are at risk of not getting the food they need due to coronavirus disruptions, according to the United Nations and World Bank.

While domestic crops and capacity go to waste, the imports the region relies on have also dried up as major suppliers, including India, Vietnam and Cambodia, have reduced or even banned rice exports to make sure their countries have enough food to cope with the pandemic.

Meanwhile, scarcity has driven up prices of the main staple food beyond the reach of some people since lockdowns were announced in three states at the end of March to tame the spread of the virus.

Sub-Saharan Africa, the world’s largest rice-importing region, could be heading from a health crisis straight into a food security crisis, the World Bank warns.

More widely, the United Nations says coronavirus disruptions could double the number of people globally without reliable access to nutritious food, to 265 million.

“There is no question about it that there is an imminent problem of food insecurity, not only in Nigeria, but also in nations all over the world,” Nigeria’s Agriculture Minister Muhammed Sabo Nanono told Reuters.

STRATEGIC RESERVES

Nanono said Nigeria had at least 38,000 tonnes of grains in government-controlled strategic reserves. It is looking to replenish with 100,000 additional tonnes.

However the region has among the lowest inventories relative to consumption, so export restrictions mean rice shortages “could happen very quickly,” according to John Hurley, lead regional economist for west and central Africa for the U.N.’s International Fund for Agricultural Development.

Nigeria has substantially increased domestic rice production in recent years. But figures from the U.S. Department of Agriculture (USDA) show it still imports at least a third of what it consumes. Across sub-Saharan Africa, countries rely on imports for roughly 40% of rice consumption. 

This puts these countries at particular risk.

India, the world’s largest rice exporter, temporarily stopped new export agreements earlier this month, while lockdowns and supply chain disruptions in Pakistan, Vietnam and Cambodia have limited available exports.

Since only 9% of global output is traded internationally, the curbs hit prices immediately, the USDA said.

“We need to make sure we’re not taking policy measures that are going to hurt the rural poor and people in developing countries, said Hurley.

The price of a bag of imported rice rose by more than 7.5% in Abuja and Lagos between the third week of March and early April, according to SBM Intelligence, while bags of local rice became about 6%-8% more expensive.

LOCUSTS PLAGUE

In Kenya, panic-buying and government programmes to distribute rice to low-income households have already depleted reserves.

If imports don’t pick up, East Africa alone could face a shortfall of at least 50,000-60,000 tonnes by the end of the month, said Mital Shah, managing director of Kenya-based Sunrice, one of the region’s largest rice importers.

“The entire supply chain has been disrupted,” Shah said. “In the next couple of weeks, East Africa is going to have a huge shortage.”

Getting the bills of loading for imports into Kenya has also stretched from three to four days to three to four weeks. In Nigeria, clearing imports has gone from weeks to months.

Senegal’s rice imports have fallen by around 30% due to international supply disruptions, said Ousmane Sy Ndiaye, executive director of UNACOIS, a Senegalese commerce industry group. He estimated the nation had enough in storage to cover two months.

Growing rice in nations outside East Africa, such as Nigeria, is also more important now due to a plague of locusts in East Africa that has decimated crops this year.

BROKEN CHAINS

Domestic movement restrictions and import delays are also hindering farmers, and some are warning that production will fall if governments do not act.

A survey by AFEX Commodities Exchange Limited, a Nigerian company that assists the agriculture sector with logistics and financing, found that Nigeria’s fertilizer stocks are currently 20% below normal levels. There are only enough seeds and other inputs to farm 1 million hectares out of the roughly 30 million typically farmed, the study showed.

Other farmers say the lockdowns are hindering farm inspections by banks, putting their financing at risk, and creating problems physically getting tractors – which are often hired – to fields. Planting rice would typically start in May.

“Most people in the industry I speak with are worried,” said Dimieari Von Kemedi, managing director of Alluvial Agriculture, a farm collective.

Nigeria’s government has created a task force to minimize the coronavirus’s impact on agriculture. Nanono said it was creating ID cards for those in the agriculture sector, from farmhands to food truck drivers, to enable them to move freely.

He said the government was taking steps to make sure farmers, millers and marketers could operate. The agriculture ministry is working to increase locally produced fertilizers, while the central bank would look to expand financing for farmers, he added.

Help cannot come soon enough for Yialase in Benue, who is awaiting the day marketers return.

“When they start to come, I can mill everything here, and they will buy.”

(Reporting by Libby George; Additional reporting by Abraham Achirga in Abuja, Christian Akorlie in Accra, Loucoumane Coulibaly in Abidjan, Ayenat Mersie and Duncan Miriri in Nairobi; Graphics by Gavin Maguire; Editing by Alexis Akwagyiram and Pravin Char)

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Crude tanker storage, orderbook dynamics could balance demand lull

Source: S&P global

Teekay Tankers is looking toward potentially bullish tanker supply factors, namely discharge delays, floating storage and the orderbook environment to combat depressed crude cargo demand in the near and medium term, CEO Kevin Mackay said Thursday.

“In the near term, we anticipate that rates will remain volatile due to a continued mismatch between oil supply and demand and an ongoing need for floating storage,” Mackay said in the company’s first-quarter earnings call.

The company recorded the highest spot rates for their mid-size tanker fleet in more than 10 years in Q1 2020, as a collapse in crude prices from a failure of OPEC+ countries to reach a supply cut agreement led to a deep contango structure that boosted charterer interest in floating storage utilization and healthy spot cargo demand.

Entering Q1 2020, the cost of taking an Aframax on a USGC-UK Continent/Mediterranean run was at sky-high levels, averaging $45.55/mt in January, only to peak again on March 16 at w197.5, or $40.25/mt, and April 23 at w205, or $41.78/mt. Freight for the route has since dropped to w85, or $17.32/mt, a total decline of 58.5% since the April spike.

Freight across all major dirty tanker ship classes has been on the decline since the beginning of May as production cuts of at least 9.7 million b/d by OPEC+ countries came into play and as continued demand destruction from the coronavirus outbreak has left cargo inquiry dismal.

Global crude demand is expected to fall by 8.6 million b/d in 2020, according to the most recent estimates released May 14 by the International Energy Agency.
FLOATING STORAGE AND DELAYS TIE UP SUPPLY

Increased floating storage demand has lent support to freight rates across the board since the mid-March crude price fallout but has since declined as the crude contango structure continues to narrow. Although fresh inquiry has fallen, impacts from high activity in March and April could continue to lend support to rates, including discharge delays at ports and timely unwinding of floating storage deals.

Teekay estimated that over 100 crude tankers are currently being utilized for traditional floating storage, defined by being idle for at least 30 days, while an additional 100 ships are seeing delays at ports, sitting on demurrage for periods of seven-20 days, Mackay said on the call.

“All told around 10% of the crude tanker fleet is being used as some form of floating storage, thereby reducing the number of ships available for transporting cargo,” Mackay said. “This tightening of available fleet supply combined with healthy cargo supply caused a significant increase in tanker utilization during the first quarter.”

Other dirty tanker owners, who jumped on the opportunity to lock in high daily earnings on storage or time charter deals at the end of Q1 and the beginning of Q2 2020, are expecting to see positive fallout from the fixing spree in the coming year.

Since the start of the year, Teekay has entered into five one-year charter agreements for Suezmaxes at an average of $45,600/d one six-month charter at $52,500/d, and three one- to two-year Aframax charters at an average of $26,750/d, the company said.

At least 20% of total spot available days for Teekay’s fleet will be booked for the next 12 months.
BULLISH ORDERBOOK TO BOOST OUTLOOK

Teekay also expects fleet growth to lend support to freight into the coming years as newbuild orders remain depressed on owner uncertainty of upcoming environmental regulations.

“Very low tanker fleet growth due to a small orderbook and high scrapping may lead to a faster rebalancing than in previous market cycles,” Mackay said.

The current order book as it stands is extremely bullish, with newbuild orders at only 8% of the total global fleet, a 23-year low, according to the company.

In addition, the company expects higher rates of scrapping in the near future, with approximately 19% of the mid-size tanker fleet 15 years or older.

The post Crude tanker storage, orderbook dynamics could balance demand lull: Teekay appeared first on Nucleus Marine .

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