Global fertilizer prices are near record highs and may remain high not only through the end of 2022, but beyond. It is reported by the UkrAgroConsult.
This increase in prices is caused by a number of factors, including the Russian-Ukrainian war. As a result, there is a negative impact on the global agricultural industry.
The report by the United States Department of Agriculture (USDA) states , that in the structure of costs of agricultural producers of the United States, 1/5 of the part falls on fertilizers. And for corn and wheat producers, this figure is even higher. In particular, fertilizers account for 36% of the operating costs of corn farmers and 35% for wheat farmers. In addition to raising prices, the Russian invasion of Ukraine has worsened the already difficult fertilizer supply situation and caused import and export restrictions, which will exacerbate product shortages.
It all started with rising natural gas prices in 2021, superimposed on supply chain disruptions caused by the COVID-19 pandemic.
The situation worsened when Russia and China introduced export restrictions, and then international sanctions against Belarus and Russia came into effect. These two countries are the main suppliers of fertilizers to the world market. Recently, many countries have imposed restrictions on Russian imports. In response, Russia introduced initial restrictions on the export of nitrogen and complex nitrogen fertilizers until June 2022. Since June, the Russian government has slightly increased the quota limits for the export of certain fertilizers. Thus, nitrogen fertilizers should be increased by 231,000 tons to 5.7 million tons, complex or complex nitrogen-containing fertilizers by 466,000 tons to 5.6 million tons.
The report notes that China, Russia, the United States, India and Canada together produce more than 60% of the world’s nutrients. The largest producer is China, the share of which reaches approximately 25%. At the same time, he himself is the largest consumer of fertilizers.
At the same time, the report states that Russia and Belarus play a decisive role in the global fertilizer market, as they account for almost 20% of global exports. The United States purchases 14% of imported fertilizers from Russia and 3% from Belarus. Since Russia and Belarus are the two limited suppliers of potash fertilizers, economic sanctions against Russia and direct sanctions against Belarusian potash adversely affect global potash supplies.
The war between Russia and Ukraine affects the global supply of fertilizers and food. As a result, prices are likely to remain high until the end of the Russo-Ukrainian war, as it takes an average of 3 to 5 years to ramp up fertilizer production if the necessary reserves are available. However, in some countries, reserves of phosphates and potassium are limited.
Some countries have imposed restrictions on imports as part of sanctions against Russia. On April 8, the European Union introduced quotas for the import of certain fertilizers as part of a package of sanctions. But this will increase the pressure on the global fertilizer market. The United States has also imposed sanctions on Russia, limiting access to parts of the pipeline and other resources that could be vital to its fertilizer production process. Also, the European Union and the USA introduced certain sanctions against Belarusian fertilizers.
The report also emphasizes that Russia’s invasion of Ukraine led to a halt in Ukrainian fertilizer production. Despite the fact that Ukraine is a relatively small producer, according to the International Fertilizer Association, in 2019 it produced 1.58 million tons of fertilizers and provided more than 75% of domestic nitrogen consumption.
It is noted that in 2021, 65% of imported fertilizers came to Ukraine from Russia and Belarus. Despite the war, Ukrainian farmers continue to grow crops in 2022, but their available fertilizers were mostly purchased in 2021. Given Ukraine’s position as a major exporter of grain and oil crops, a shortage of fertilizers could further reduce Ukrainian production, which would affect global food security.
The global outlook for food production in 2023 could be even more dire, according to the USDA.As the Russian-Ukrainian war continues and fertilizer supplies remain tight, high prices are likely to have an even stronger impact on crop-growing decisions among US and global farmers.