Global Shocks, Climate Risks and Economic Realities Reshape South Africa’s Agricultural Outlook

• Global geopolitical tensions, higher energy prices and climate risks are increasingly shaping South Africa’s agricultural outlook after several strong years for the sector
• Rising fuel and fertiliser costs are emerging as the main pressure points, squeezing farm margins and increasing uncertainty for producers and agribusinesses
• South Africa remains vulnerable mainly through higher prices rather than supply shortages, with inflation and tighter credit weighing on agricultural investment
• The likely return of El Niño later in 2026 raises downside risks to agricultural output into 2027, despite the sector’s underlying resilience.

South Africa’s agricultural sector enters the next cycle against a backdrop of unusually elevated global uncertainty. While the industry has performed well in recent years, despite logistics constraints and biological risks, a convergence of geopolitical tensions, higher energy prices and climate risks is reshaping the outlook for producers, exporters and agribusinesses.

In a recent Coface webinar, Aroni Chaudhuri, Coface Chief Africa Economist, outlined how international developments are progressively filtering through to the agricultural sector, with pressures expected to intensify towards the end of 2026 and into 2027.

Global geopolitics: indirect but unavoidable pressure
Although agriculture is not the first sector to feel the immediate effects of the Middle East conflict, the current crisis is creating conditions that will eventually weigh on global agri food systems. The most immediate transmission channels are energy and fertilizers.

Disruptions to oil flows have resulted in an imbalance between global supply and demand, pushing prices higher and keeping them there. Unlike the previous shock on oil prices, where volatility was largely driven by risk sentiment, the current environment is characterized by actual physical shortages in oil markets. This distinction is critical for agriculture, a sector heavily exposed to fuel intensive production and transport.

Higher oil prices raise farming costs directly through mechanisation and logistics, and indirectly through inflation across the broader economy. For emerging markets such as South Africa, these price pressures are especially significant.

Rising input costs and fertilizer uncertainty

Beyond energy, disruptions to chemical supply chains are adding another layer of complexity. Fertilizer markets, while currently supported by existing inventories, are already experiencing upward price pressure. The risks here are less about immediate shortages and more about future accessibility and affordability, particularly once large importing nations return to the market to rebuild stocks.

For South African buyers, this creates uncertainty around input costs at a time when margins are already under pressure. Even modest fertilizer price increases can significantly affect cash flow, especially for smaller and mid sized operators within the agricultural value chain.

Why South Africa is vulnerable, but not exposed to immediate supply failure
South Africa’s vulnerability to global shocks is primarily price driven. As a net importer of refined petroleum products, the country remains highly sensitive to sustained increases in global oil prices. However, its level of income and market access should allow it to secure supply, albeit at higher cost.

The implications are macroeconomic. Higher fuel prices feed into inflation, particularly through transport, constraining the scope for monetary easing. Low inflation had been an important driver of growth momentum in South Africa, and renewed price pressure limits the ability of the Reserve Bank to support demand through monetary policy.

Tighter financial conditions mean that credit availability and borrowing costs are likely to remain elevated, affecting investment and working capital across the agricultural sector.

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