Fertiliser prices continue to rise as Russia-Ukraine conflict goes on

Concerns about shortages increase because Russia is a major fertiliser producer

Brazil, an agriculture superpower that leads soybeans, coffee and sugar exports, is reliant on fertiliser imports to produce food.  Reuters
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Fertiliser prices continue to increase as supply upheaval from Russia leaves governments struggling for crop nutrients, adding to concerns that record global food inflation will grow.

The Green Markets North American Fertiliser Index rose by 16 per cent on Friday to a new high. Prices for the widely used nutrient urea in New Orleans soared by 22 per cent, also reaching a record. An index for potash in Brazil rose by a record 34 per cent.

Russia is a major low-cost exporter of every major kind of crop nutrient. The country urged domestic fertiliser producers to reduce exports this month, stoking fears of shortages. The war is also pushing up the cost of natural gas, the main input for most nitrogen fertiliser, forcing some producers in Europe to cut output. At the same time, prices for staple crops such as wheat and corn are soaring as the war in one of the world’s breadbaskets threatens to push millions more into hunger.

“It’s a slow-moving disaster,” said Alexis Maxwell, an analyst at Bloomberg’s Green Markets.

Countries that would normally import from Russia are working to acquire supplies. Brazil, the leading fertiliser importer, will propose excluding crop nutrients from sanctions imposed on Russia in a meeting at the United Nations Food and Agriculture Organisation next week. The plan has support from Argentina and other South American countries.

Brazil wants “to secure global food security”, Tereza Cristina, the country’s agriculture minister, said Friday. She will meet the FAO’s general director, Qu Dongyu, on March 16.

Brazil, an agriculture superpower that leads soybean, coffee and sugar exports, is reliant on fertiliser imports to produce food. The nation currently imports 85 per cent of its fertiliser consumption, with Russia as its main supplier. For nitrogen and potash, the dependence on imports exceeds 90 per cent.

The government is now addressing the issue. On Friday, it launched a national plan aiming to reduce imports to 45 per cent of fertiliser use by 2050. The plan, which has been designed for over a year, includes measures to encourage local production such as increasing the offer of credit lines, changes to tax polices and logistic improvements. But those are all long-term measures that will bring little relief to the fertiliser shortage caused by the war. For the short term, the minister is intensifying “fertiliser diplomacy”, she said.

Ms Cristina will travel to Canada on Saturday in an effort to ensure potash supplies, and she recently visited Iran. On Thursday, she met ambassadors from Arab nations that could increase fertiliser supplies to Brazil.

“The diplomacy with producing countries may slightly increase imports, but it will not make up for the lack of Russian imports as the entire market is tight,” said Luigi Bezzon, an analyst at StoneX in Campinas, Brazil.

Less than a third of the crop nutrients needed for summer plantings starting in September have been bought so far, according to Mr Bezzon. “It’s unlikely that Brazil will be able to repeat the same fertiliser use seen in the past season,” he said.

Rising prices are stoking concerns that the few companies that work in fertiliser and other crop inputs could take advantage of the price squeeze. The US Department of Agriculture announced on Friday that it is seeking information on competition in the fertiliser, seed, farm input and food wholesale and retail markets as part of a public inquiry into concentration in the industries.

“As I talk to farmers, ranchers and agriculture and food companies about the recent market challenges, I hear significant concerns about whether large companies along the supply chain are taking advantage of the situation by increasing profits – not just responding to supply and demand or passing along the costs,” Secretary of Agriculture Tom Vilsack said.

Updated: March 14, 2022, 7:52 AM