As sanctions hit Russia, fertilizer shortage threatens global food supply

CHICAGO — Skyrocketing fertilizer prices are pushing farmers around the world to cut back on their use and reduce the amount of land they plant, fallout from the Ukraine-Russia conflict that has warned some agriculture industry veterans of shortages food.

Western sanctions against Russia, a major exporter of potash, ammonia, urea and other soil nutrients, have disrupted shipments of these key inputs around the world.

Fertilizers are essential to maintain high yields of corn, soybeans, rice and wheat. Producers are scrambling to adapt. The pivot can be seen in Brazil’s agricultural powerhouse, where some farmers are applying less fertilizer to their corn, and some federal lawmakers are pushing to open protected indigenous lands for potash mining.

In Zimbabwe and Kenya, small farmers are returning to using manure to feed their crops. In Canada, a canola grower has already stockpiled fertilizer for the 2023 season in anticipation of even higher prices to come.

Elsewhere, farmers are taking similar steps. Reuters spoke to 34 people on six continents, including grain farmers, agricultural analysts, traders and farmer groups. Everyone was concerned about the cost and availability of fertilizers.

In the United States, fertilizer bills are expected to jump 12% this year, after rising 17% in 2021, according to data from the American Farm Bureau Federation and the United States Department of Agriculture (USDA). Some growers are considering switching to crops that require fewer nutrients. Others plan to cultivate less area. Others say they’ll simply use less fertilizer, a strategy crop experts predict will hurt yields.

Production is most at risk in developing countries, whose farmers have fewer financial resources to weather the storm, said Tony Will, chief executive of Illinois-based CF Industries Holdings, a leading producer. nitrogen fertilizers.

“My concern at the moment is actually a food crisis on a global scale,” Will told Reuters.

On Saturday, Peru declared a state of emergency in its agricultural sector over fears of food insecurity. The decree says that the country’s sown areas have fallen by 0.2% since August due to higher fertilizer prices, and that the volume of cereal imports from Peru for animal feed has also fallen due to problems. of cost. The government is developing a plan to increase the country’s food supply.

Global fertilizer prices were already high before Russia invaded its neighbor on Feb. 24, as record high prices for natural gas and coal forced some fertilizer makers to cut production in the energy-intensive sector. Ukrainian cities have been besieged by missiles, tanks and troops in what Moscow has called a “special operation” to demilitarize the country. Russia denies targeting civilians in the conflict.

Western nations have responded with tough economic sanctions against Russia, while the United States and the European Union have imposed new sanctions on Belarusian President Alexander Lukashenko, who has backed the Russian offensive.

Together, Russia and Belarus accounted for more than 40% of global potash exports last year, one of three key nutrients used to boost crop yields, Dutch lender Rabobank said this month. Additionally, Russia accounted for about 22% of world ammonia exports, 14% of world urea exports, and about 14% of monoammonium phosphate (MAP) – all major types of fertilizers.

The sanctions disrupted sales of fertilizers and crops from Russia. Many Western banks and traders are avoiding Russian supplies for fear of not complying with rapidly changing rules, while shipping companies are avoiding the Black Sea region for security reasons.

All of this represents a double whammy for the global food supply. Russia and Ukraine are major grain producers. Together, they represent around 30% of world wheat exports and 20% of maize exports.

Grain shipments via the Black Sea have already been disrupted. The blocking of deliveries from these two countries has helped to stimulate runaway global food inflation.

The World Bank said last week that a number of developing countries were facing short-term wheat supply shortages due to their heavy reliance on Ukrainian exports. But the fertilizer crisis is in some ways more worrisome because it could inhibit food production in the rest of the world that could help fill the void, said Maximo Torero, chief economist of the United Nations Food Organization. and farming.

“If we don’t solve the fertilizer problem and the fertilizer trade doesn’t continue, we will have a very serious supply problem next year,” Torero told Reuters.

Brazil, the world’s largest soybean exporter, is heavily dependent on imported fertilizers such as potash, which accounted for 38% of the crop nutrients it used last year. Russia and Belarus were responsible for half of these shipments.

Prior to the Ukraine-Russia conflict, Brazilian farmers were already reducing corn plantings due to rising fertilizer prices. Soybean cultivation is also likely to be affected, with growers growing more slowly than in previous years, according to Agroconsult, a Brazilian agricultural consultancy firm.

In the central western state of Mato Grosso, farmer Cayron Giacomelli told Reuters he had already reduced the use of fertilizer on his current maize crop. He said he would do the same when he plants soybeans later this year, a move he says could cut his crop by at least 8%.

Giacomelli said fertilizers are hard to come by and some dealers won’t finalize sales until cargo ships dock in Brazil. He still blames himself for not making a purchase he was negotiating just before Russia invaded Ukraine. “I got distracted and now I’m paying more,” Giacomelli said.

Lawmakers in Brazil’s agricultural states, meanwhile, are pushing for legislation that would open up indigenous lands in the Amazon to potash mining. This measure is disputed by members of the local Mura tribe, who claim that mining would destroy the natural habitat on which they depend. The bill is still making its way through the nation’s congress.

In Zimbabwe, scarce and expensive imports have forced maize farmers like Boniface Mutize to make their own fertilizer. “We mix cow dung or chicken waste with zinc,” he said. It is the same in rural Kenya. Farmer Mary Kamau said she, too, has reduced her purchases of commercial fertilizers and is using manure to feed the coffee and avocados she grows on 12 acres in Murang’a County. She worries about the consequences for her family.

“If I don’t get a good harvest, I don’t get good prices. And it will affect me for the next two years – it’s not just this season,” Kamau said.

In the United States, Mike Berry, a fifth-generation farmer from New Mexico, has similar worries. He recently paid $680 a ton of liquid nitrogen to fertilize his corn crop, an “exorbitant” price that he said was 232% higher than last year’s price.

Berry said he plans to reduce his spring plantings of corn for livestock feed to about 300 acres from his usual 400 to 600 acres. Berry said he would also reduce liquid nitrogen applications by about 30%, which could drop his yields by 25%.

Conclusion: “We are going to produce less,” he said. This may seem shortsighted given that commodity prices have surged sharply in recent weeks. But the cost of growing crops exceeds potential income for many farmers.

“Planting decisions are increasingly being made not on market fundamentals but rather on the cost of production determined by the price and supply of fertilizer,” dozens of U.S. lawmakers wrote in a letter dated 17 March to the United States International Trade Commission. They were asking for duty relief on fertilizer imports from Morocco and Trinidad and Tobago.

US farmer Don Batie described the stressful process of getting enough fertilizer for this year’s planting. “It’s crazy,” said Batie, who grows corn and soybeans on 1,500 acres in Lexington, Nebraska. “The moment they get a price and they quote it to you, the price changes.”

Asia is also in trouble. India, which imports fertilizer for its sprawling agricultural sector, is increasingly looking to Canada and Israel to replace its Russian supplies. Thailand, meanwhile, is facing pressure on its flagship rice crop. Russia and Belarus accounted for about 12% of its fertilizer imports last year, according to Thai government data.

But buying elsewhere could prove tricky, in part because domestic fertilizer price controls are squeezing Thai importers as world market prices soar, according to Plengsakdi Prakaspesat, president of Thailand’s Fertilizer and Agricultural Supplies Association.

“If you’re a trader and you’re absolutely going to lose money, are you still going to import more stuff?” says Plengsakdi. Last year, China imposed export restrictions on fertilizers to protect its own farmers as world prices soared due to strong demand and high energy prices.

Beijing was expected to ease those restrictions this year, potentially increasing global supply, said Gavin Ju, senior fertilizer analyst in the Shanghai office of commodity consultancy CRU.

But he said that was less likely now with the global market chaos. Concerns about rising inflation and a protracted war in Ukraine are prompting some farmers to plan well ahead.

In Manitoba, Canada, corn and canola farmer Bert Peeter recently agreed to spend more than C$500,000 to purchase 80% of the fertilizer he will need – by 2023. Although prices are skyrocketing, he thought things might get even worse.

It “might not be finished after a year,” Peeter said. — Reuters