The Impact of the Ukraine-Russia Crisis on Commodity Prices in Local Markets in Uganda

1. The Impact of the Ukraine-Russia Crisis on Commodity
Prices in Local Markets in Uganda
Paul Guthiga
Senior Scientist, AKADEMIYA2063

2. Introduction [1]
 The onset of the Russia-Ukraine war affected global trade, through supply chain
disruptions and a hike in commodity and energy prices across the globe
 The impacts were transmitted (to a varying extent) to domestic markets across Africa
 Why is the crisis of significance to Africa?
 The actors in the conflict are major players in the global grain trade (approx 25% of wheat; 15% of
maize)
 They are major exporters of fertilizer, oil and natural gas
 Many countries in the continent rely on imports to meet local demand
 Even for those that do not import directly from Russia/Ukraine, disruption is felt through ‘contagion
effect’ transmitted through primary trading countries (Badiane at al, 2022)
 Measures need to be taken to protect the welfare of the affected people

3. Introduction [2]
 Changes in prices were expected to be higher after the war and likely to remain high in
the medium term
 Critical aspects of analysis of time series price data include:-
 Trend analysis
 Structural change
 Volalitity
 Given the short series of data (intial 5/6 months and consequently 5/6 additional
months), the analysis is limited to ‘trend analysis’ and comparison with global price
changes (to identify patterns of co-movement)

4. Introduction [3]
 Uganda imports substantial amounts of wheat, rice, sugar, cooking oil to bridge deficit
in local demand
 In 2020, wheat was the 6th most imported commodity into Uganda (over 620,000 MT
was imported; bulk of it from Russia)
 In 2020, Sugar imports into Uganda were valued at over USD 51 million and were
sourced from the India, Egypt among other countries
 In 2020, Rice was the 9th most imported commodity into Uganda
 About 70% was imported from Tanzania while a substantial amount is imported from Asian countries such as
Pakistan and Thailand
 Similarly, about 50% of cooking oil is also imported
 Imported mainly from South East Asia –Malaysia, Indonesia
 Dependence on imports, makes the country vulnerable to global price fluctuations

5. Data & Method [1]
 Weekly price data (in Kampala ) and monthly for other markets (Mbarara, Mbale &
Gulu) for select basic food commodities (rice, sugar, wheat flour, cooking oil) and
energy (Petrol, Diesel and Cooking gas [LPG]) were analyzed
 Weekly data is recored 4 times in a month [recored in Ush/kg for dry food commodities
and Ksh/liter for cooking oil and fuel]
 The data was obtained from the Uganda Bureau of Statistics (UBOS), a government
agency responsible for collecting and compiling official statistics in Uganda
 The initial analysis tracked price changes from January to June 2022 (for Kampala
market) and from January to May 2022 for the other three markets…additional
analysis from remaining months of 2022 is also presented

6. Data & Method [2]
 The analysis involved tracking changes in weekly/monthly prices and comparing
those changes with the observed changes in global prices of same commodities (or
their derivatives)
 The global prices were obtained from the World Bank Commodity Market Outlook
data - estimates monthly prices for around 46 commodities
 The comparison shows the extent to which prices in local markets have responded
to global price movements & the extent to which they compare across local
markets

7. Findings: Food price changes in urban markets [1]
 Cooking oil recorded a sharp price hike of 41% between January and end of June 2022; there were two price spikes,
(1st Wk of Feb & 4th Wk of May)
 Post June; prices were stable between June-Sept and then two price dips and then a hike in December
 By 4th Wk of cooking oil price was 24% higher compared to 1st Wk of Jan
 The price of wheat rose modestly in Kampala (6%) from the first week of January to the fourth week of June 2022
 By 4th Wk of December price was 24% higher than price recorded in 1st Wk of January
 Sugar price rose by 39% between January and June; rise was recorded in the 4th Wk of April and remained high until
the end of June
 By the last week of December, the prices had risen by 61% compared to 1st week of January
Figure 1: Weekly food prices in Kampala (Jan-Dec 2022)
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk
4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk
4
Wk5
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
January Feb March April May June July August September October November December
Wheat Rice Cooking oil Sugar

8. Findings: Food price changes in urban markets [2]
 Between Jan-May wheat price rose modestly by 8% but by Dec it was 23% higher compared to January
 Sugar price rose by 18% between Jan-May and remained stable; by end of December, it was same level it was in
January
 Price of rice remained relatively stable in Jan-May (local production dynamics) by by Dec it was 38% higher
 Price of cooking oil rose by 11% in the Jan-May; by Dec it was 10% higher compared to Jan following a decline in the
month of November
Figure 2: Monthly Food prices in Mbarara (Jan-Dec 2022)
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jan Feb Mar Apr May June July August September October November December
Sugar Wheat Rice Cooking oil

9. Findings: Food price changes in rural market [3]
 Jan-May wheat price rose modestly by 8% but by Dec it was 15% higher compared to January
 Sugar price rose by 18% between Jan-May and remained stable; by end of December, it had rise by 60% of its
January level
 Price of rice remained relatively stable in Jan-May (local production dynamics) by by Dec it was 25% higher
 Price of cooking oil rose by 11% in the Jan-May; by Dec it was 10% higher compared to Jan following a decline in
Nov/Dec
Figure 3: Monthly Food Prices in Mbale (Jan-Dec 2022)
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jan Feb Mar Apr May June July August September October November December
Sugar Wheat Rice Cooking oil

10. Findings: Food price changes in rural market [4]
 Jan-May wheat price rose modestly by 8% but by Dec it was 15% higher compared to January
 Sugar price rose by 21% between Jan-May in Gulu; by end of December, it had rise by 45% of its January level
 Price of rice in Gulu rose by 46% in Jan-May and remained at same high level by December
 Price of cooking oil rose by 30% in the Jan-May; by Dec it was still 30% higher compared to Jan
Figure 4 Monthly Food Prices in Gulu(Jan-Dec 2022)
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jan Feb Mar Apr May June July August September October November December
Sugar Rice Cooking oil

11. Findings: Trends in Weekly Energy Prices for Kampala [5]
Figure 5: Weekly energy prices in Kampala (Jan-Dec 2022)
 By May 2022, fuel price commodities had rise by 30%, 22% & 24% for diesel, petrol and cooking gas (LPG)
respectively
 By December 2022, the prices remained higher compared to January; Diesel (29%), Petrol (16%) and LPG (55%)
-
2,000
4,000
6,000
8,000
10,000
12,000
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk
4
Wk1
Wk2
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Wk4
Wk1
Wk2
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Wk
4
Wk5
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
Wk1
Wk2
Wk3
Wk4
January Feb March April May June July August September October November December
Diesel Petrol LPG

12. Findings: Comparing Price Changes in Local and Global Markets [6]
 Changes in global prices of commodities
are to some extent similarly reflected in
local markets
 Some non-correspondences are also
noted, global wheat prices increased by
40% from January, while in Kampala only a
6% corresponding rise was observed
 This can be explained by the lower
dependence on wheat as a staple
commodity in Uganda and the availability
of substitutes
 Energy prices rose in the same direction
and partly comparable magnitude
Table 1: Summary of Price Changes: Comparison between Local
Markets and Global Averages (Jan-May 2022)
Commodities Global price
change (%)
Change in
local urban
market
(Kampala)
Change in
local rural
market (Gulu)
Wheat +40% +6%
Sugar +3% +39% +21%
Rice +10% +34% +46%
Cooking oil +19% +41% +30%
Fuel Crude Oil:
+31%
Diesel: +45%
Petrol: +30%
Petrol: +12%
Liquefied
petroleum
gas (LPG)
+28% +24% +27%

13. Findings: Comparing Price Changes in Local and Global Markets [7]
 A global price increase of 31% for crude oil is reflected in the rise of diesel and petrol
prices by 45% and 30% respectively, in Kampala
 Similarly, the price of LPG has risen by 24% and 27% in Kampala and Gulu respectively,
in tandem with a global price increase of 28%
 Based on this analysis, there appears to be strong transmissibility of changes in
global prices to local markets, increasing Uganda’s vulnerability to international
shocks
 Local policies and strategies targeted at dampening the effects of such shocks to
local consumers are therefore required

14. Conclusions and implications
 The brief found that there has been a general rise in price of food and energ
commodities in Uganda reflective of similar changes at the global level
 For some commodities like sugar, local prices rose more sharply than the global price
with some difference in price change patterns between rural and urban areas
 The rise in prices is of concern to policy makers hence need to protect the mos
vulnerable through targeted social protection
 Long term measures to deal with global shocks
 More freer regional trade
 Boosting agricultural production
 Invest in energy efficient/saving technologies

15. References
1. Badiane, O.; I. Fofana; L. M. Sall; and B. Cesay. 2022. Contagion and Exposure of African Countries to
Global Wheat Trade Disruptions. Ukraine Crisis Brief Series, No.1. Kigali and Dakar. AKADEMIYA2063.
2. World Bank. Accessed on June 10th 2022. https://www.worldbank.org/en/research/commodity-
markets

16. THANK YOU