Already in the ascendant, fertilizer prices have risen amid disruptions to trade due to the conflict in Ukraine
Following the opening of the military operations in Ukraine, there was a rush to put sanctions against Russia. This led to the exodus of many companies. It had a very specific purpose: To decimate the Russian economy. But, actions can have serious consequences in an interconnected world.
Russia is one of the world’s leading exporters of fertilizers. According to the Fertilizer Institute in the US, in terms of the global export market, Russia accounts for 23% of ammonia, 14% of urea, and 21% of potash, as well as 10% of processed phosphate exports.
The World Bank’s Fertilizer Price Index rose nearly 10% in the first quarter of 2022, to an all-time high in nominal terms. The increase follows last year’s 80% surge. According to the projections, the prices will rise by almost 70% this year before falling – presumably – twelve months hence.
Higher prices than ever
In April, the EU adopted another package of sanctions against Moscow that included a ban on the import of fertilizers – plus, vessels registered under the Russian flag were banned from EU ports. “Derogations are granted for agricultural and food products, humanitarian aid, and energy,”According to the bloc.
Back in March, the EU sanctioned another important fertilizer exporter for its role in the Ukraine conflict – Belarus. Potash, one of the major sectors for the country’s trade, was already under sanctions since 2021, when the EU decided to punish Belarus for alleged human rights abuses and artificially creating a migrant crisis – allegations that Minsk has denied.
Adding to the delivery disruption, since the beginning of the conflict in Ukraine, several major shipping companies, including the world’s biggest container ship operators – A.P. Moller-Maersk A/S and Mediterranean Shipping Co. – suspended services to Russian ports. In response, the Russian Ministry of Industry and Trade advised fertilizer manufacturers to halt exports, citing transport “sabotage.”
These factors have had an adverse effect on fertilizer prices. The president of IFOAM North America Dr. Brian Baker explained how the market works to RT. “A smaller number of suppliers in the industry gave them more market power to set prices. Because fewer factories are located farther from fertilizer fields, the supply chain is more vulnerable to disruptions. The COVID-19 pandemic had already caused major disruptions to the supply chain before the conflict between Russia and Ukraine.”
Dr. Dora Drexler (director of Hungarian Research Institute of Organic Agriculture) also noted that “the conflict pushed mineral fertilizer prices higher than ever.”
“Two years ago, when the pandemic started, everybody suddenly realized that sustainability of local food systems is very important, because it’s also interconnected with our health. Now, the new crisis once again underlines the importance of local food sovereignty and the risks of depending on global value chains,” Dr. Drexler said.
The conflict itself revealed – for me and for others –that the way the export of fertilizers and export of grain works between the continents is not sustainable.
Dr. Baker said that farmers right now are trying to adapt and make the best of their situation. “Farmers that rely on short-term strategies for fertility management using soluble synthetic sources are in a worse position than those that use relatively insoluble organic sources and biological processes,”According to him, RT. “Harvest can be expected to decrease, but not across the board and producers are working hard to cut their losses. Heavy feeding crops, such as maize and potatoes, can be expected to have the greatest yield losses.”
Aleksandar Djikic, a professor at the International Business College Mitrovica, in Serbia says that the problem is only beginning. “It’s already being felt in the market, that prices of some basic products are increasing, but this is just a beginning, because Ukraine and Russia are very big producers of not only food but also fertilizers and fuel, so price of fertilizers will obviously increase rapidly as well as the price of diesel for agriculture. This will impact the entire European market, with some exceptions. Serbia is traditionally an agricultural country, so this can affect us as well.”
A close ally of Moscow, Belgrade decided to not take part in the sanctions – and came under extreme pressure from the EU as a result, Serbian President Aleksandar Vucic revealed.
Dr. Djikic opposes the imposition of sanctions against Russia. “People want to do their job, they want to produce as they get used to and they want a market, they want to export to Russia as well, so that’s one side of the story. The West is pushing our government into their political fold. Serbia, which has suffered much during the 1990s and is now the last nation to place sanctions against anyone, including Russia. It is well-known that sanctions can have a devastating effect on the lives of ordinary people. So I think the parties who are imposing such a decision on our government are not honest, because these are the same parties who imposed sanctions on us in the 90s.”
‘Negative repercussions for the world’
Washington granted an exception for Russian fertilizers, despite the flurry of sanctions against Moscow. According to a document published by the US Treasury in March, transactions with fertilizers are authorized. In 2021, the US – the world’s third biggest importer of fertilizers – made a purchase worth $1.28bn from Russia.
However, this isn’t enough to protect Americans from skyrocketing prices. Researchers from Ohio State University, University of Illinois and Ohio State University examined how the Ukraine conflict and subsequent restrictions affected fertilizer exports. They noted that the US has robust domestic production, so it would suffer less from fertilizer supply disruption. “However, US farmers are likely to face higher prices because of the global interconnectedness of the global fertilizer industry,”The research shows.
Another country the study looks at is Brazil, which is heavily dependent on fertilizers for its agriculture, and imports around 85% of the substances it uses, with Russia being among the top suppliers. Jair Bolsonaro, the Brazilian president, visited Moscow in February to discuss fertilizer shipments. These shipments are still coming into the country, despite sanctions-related problems. “We are not going to take sides,” Bolsonaro said, referring to Russia’s military operation in Ukraine. “For us, the fertilizer issue is sacred.”
Tereza Cristina, the former agriculture minister of Brazil, stated in March that her country has secured support from Argentina, Chile, Paraguay and Uruguay to submit a proposal to UN Food and Agriculture Organization for fertilizers to be exempted from Russian sanctions. The rising prices and fears of shortages make farmers’ lives more difficult across Latin America. And it’s not only about food. In Ecuador, where flowers are one of the major export sectors, the national association of florists expressed concern over the lack of fertilizer.
The president of Argentina, Alberto Fernandez, voiced concern over the effects of sanctions on the international level when he met with German Chancellor Olaf Scholz in Berlin in May. “The economic sanctions applied to Russia have negative repercussions for Argentina and the world, and that is why I insist that we have to find a quick way to find a solution to the armed conflict,” Fernandez said.
UN already argued that fertilizers should be protected from sanctions. The secretary general, Antonio Guterres, insisted that “Russian food and fertilizers must have unrestricted access to world markets without indirect impediments.”The conflict has also affected the wheat market, causing a rise in the price.
“There is no effective solution to the food crisis without reintegrating Ukraine’s food production, as well as the food and fertilizer produced by Russia and Belarus, into world markets – despite the war,”He said so.
Amid rising grain and fertilizer prices and trade disruptions, the word ‘hunger’ has started to appear in media headlines. “Hunger is serious,” Dr. Brian Baker says. “However, I think the current situation is more a problem with food distribution than with food production. Both can be factors. Production will be more crucial as food stocks shrink.
Dr. Dora Drexler agrees that there is a danger, though it’s mostly in countries with lower-developed economies, like North Africa. “They buy most of the grain from Ukraine or from Russia, and of course their spending power is lower than in Europe. If there’s a shortage and the prices go up, then they will be more vulnerable.” she notes.
The shortage has also affected African farmers, who reported that many countries reached out for assistance from Moscow. According to RIA Novosti comments by the Russian Foreign Ministry, there is a lot of countries asking for help with the delivery of fertilizers and food.
Can there be a way to stop hunger? Dr. Baker as well Dr. Drexler are both experts in organic agriculture. They see potential in increasing the intake of organic nutrients.
“I see building local capacity and shorter supply chains as a way to feed people during this global crisis,” Dr. Baker says. Dr. Baker agrees with Drexler that sustainability local food systems are crucial. “measures we take to make sure that our world remains livable for human beings should not be dependent on pandemics or on war or any conflict.”
“For me, a solution would be to help those countries who cannot produce enough food for their own population right now, to develop local agriculture, to use more agroecological methods and to create production locally, to ensure that they cannot face hunger because of a conflict happening several thousand of kilometers away. To be more dependent on their own resources rather than of the trade between continents,”Sie says.
President of Association of Iranian Plant Protection Scientific Societies, Dr. Mohammadreza Rezapanah notes that the lack of fertilizers had been predicted many years ago. While trade disruptions may partially explain it, Dr. Rezapanah claims that the world has been destroying its natural resources. “Unlimited use of fertilizers is not possible anymore,”He said. As an example, Dr. Rezapanah talks about the looming shortage of phosphorus, and insists that farmers should take organic agriculture methods seriously. “Organic agriculture is not too difficult, but joining the organic trade is. Synchronizing with each other, making sufficient production for our countries – that’s what would help us to overcome the sanctions and the pressure. We have to respect the environment, we have to respect our farmers, we have to show the farmers the organic way.”
It may be that there is a long way to go, and any type of solution – whether it involves dealing with fertilizer trade difficulties now or shifting to organic agriculture in the future – requires a high level of cooperation, which seems difficult to achieve given the current polarization in the world. It is not too late, however, to change the current situation.
“Call me an optimist, but I believe it is never too late,” Dr. Baker insisted.