By: Abrie Rautenbach - Managing Executive for Agriculture at Absa CIB

Richard Nixon went on American television and announced to the world that the United States would stop converting dollars into gold. The decision marked the beginning of the end for the Bretton Woods era and sent currencies into a period of adjustment that was uncomfortable enough for richer economies and considerably less forgiving for developing ones, whose import bills could change dramatically through decisions made far beyond their borders. Two years later, amid another devaluation of the dollar and the upheaval surrounding the Arab-Israeli war, the oil-producing countries pushed crude prices sharply higher, with the export price index rocketing from 196 to 641. Oil had become vastly more expensive in the space of a year, and its reach through the economy meant that very little dependent on energy escaped untouched for long.

That had devastating consequences for agriculture in particular, as modern food production had become heavily reliant on fertiliser whose manufacture consumed enormous amounts of energy, while petroleum powered much of what came next, from the machinery working the land to the transport carrying crops away from it. Fertiliser prices tripled and, in some cases, quadrupled over the course of a year, adding heavily to the cost of producing food across the world.

Many parallels can be drawn between then and now, as conflict and disrupted trade routes once again feed protectionist instincts, unsettle supply and work their way into the price of the fuel and fertiliser agriculture cannot do without.

One observation has become hard to shake from conversations across the continent: food security now ranks among the top three priorities in almost every market we encounter through our work at Absa. Much of that concern comes down to affordability, because inflation is pressing on the consumer at the same time as it is making food more expensive to produce, which leaves agriculture carrying pressure from both ends of the chain.