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According to the Ministry of Trade, it “had to recommend to Russian manufacturers to temporarily suspend the export of fertilizers,” until shipping companies resume regular operations and guarantee that Russian fertilizer exports will be carried out without interruption. This announcement was made against the background of the moves of the largest shipping companies in the world, which suspended their activities to and from Russia because of the security situation and the sanctions imposed by the West.
“Failure to ship fertilizers could have a direct impact on national security in some countries and result in severe food shortages for hundreds of millions of people already in the medium term,” the ministry said in a statement. According to the OEC Trade Data, the main destinations for Russian fertilizer are Brazil, China, USA, Estonia and Finland.
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The Kremlin is squeezing the global fertilizer inventory
The immediate price is expected to be paid by Brazil, followed by consumers around the world. The largest economy in South America, which is the leading producer of coffee, soy and sugar, is dependent on global agricultural powers for fertilizer imports, and following Russian moves, it has begun to look for new suppliers.
Brazil imports about 85% of its fertilizers, with about 20% of these imports coming from Russia. “Brazil depends on fertilizers, it is a sacred matter for us,” Brazilian President Jair Bolsonaro said last week, while defending his decision to maintain warm relations with Moscow, despite its offensive against Ukraine, and not join the Western boycott. Bolsonaro was one of the last leaders to visit Russian President Vladimir Putin last month, before the invasion began.
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Coffee plantation in Brazil
(Photo: Reuters)
Should Brazilian farmers be forced to pay a significantly higher amount for fertilizers, or fail to produce crops on a regular basis, the cost of agricultural produce is likely to climb and put further pressure on global food prices. Apart from coffee and sugar, Brazil is also a leading supplier of corn for animal feed, and a rise in the price of grain will directly affect the prices of animal foods.
Russian moves come months after China, also a leading exporter of fertilizers, imposed a ban on exports last July to preserve local reserves as part of its plan to improve food security in the country
The Wall Street Journal reports that according to industry analysts, the war in Ukraine and sanctions in Russia have only exacerbated the situation, and that continued global supply failure will only raise inflation levels and global hunger levels.
The total halt in fertilizer exports from Russia comes a month after the country froze ammonia exports until April, in order to provide supplies for local farmers. Russia is responsible for 23% of global ammonia production, a key raw material in the fertilizer industry, as well as 14% of urea and 21% of the potash also essential to the industry. The freeze on Russian exports, therefore, is expected to boost world fertilizer prices.
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Volunteers in Poland assist refugees from Ukraine
(Photo: Reuters)
“No one knows what’s going to happen,” said Ricardo Arioli, a soybean grower from the state of Mato Grosso in Brazil, quoted in the Wall Street Journal. “War means a complete lack of certainty. The cost of production is becoming one big disappearance,” he noted. The rating agency P&S reported last December that ammonia prices in Europe soared to the highest level in the world, $ 1,120 per tonne, following the rise in natural gas prices, the closure of ammonia plants on the continent and lower supplies from Russia. The crisis of the Nord Stream 2 gas pipeline, which has now intensified in the shadow of the invasion of Ukraine and Western sanctions, was also noted at the time as a cause of rising gas prices, and accordingly the rise in prices of the main raw material in fertilizer production. The continued shortage of gas is expected to affect not only the fertilizer industry, but also a variety of other industries in which it is widely used, including water purification, pharma, detergents and plastics.
Following the crisis, the Brazilian government has announced that it intends to launch a national program to encourage investment in potash and phosphorus mines, but according to analysts, it will be years before local farmers can benefit from local production
Brazilian Agriculture Minister Theresa Christina Diaz has said she plans to arrive in Canada later this month to ensure alternative ammonia stocks. Canada is ranked sixth among global ammonia producers, with Russia, Trinidad and Indonesia ranked in the top three. In the ranking of potash fertilizer production, Canada ranks first, followed by Russia and Belarus. Although Diaz noted that Brazil has full stocks that will suffice for farmers by October, not everyone agrees with this determination. The Brazilian National Fertilizer Association, which represents the country’s fertilizer producers, warned that local fertilizer stocks would only last for three months, when Western sanctions and traffic restrictions due to the war (see box) affected maritime shipments to Brazil, the group notes. “Ships do not come here. There are no containers at all,” a source in the Russian fertilizer industry said in an interview with Reuters.
Following the crisis, the Brazilian government also reported that it intends to launch a national program to encourage investment in potash and phosphorus mines, but according to analysts, it will be years before local farmers can benefit from it. Mining of these substances is a problem in itself, as it causes damage to the living areas of indigenous tribes.
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Brazilian President Jair Bolsonaro. “Brazil depends on fertilizers, it’s sacred to us”
(Photo: AFP)
The Russian moves come just months after China, also a leading exporter of fertilizers, imposed a ban on exports last July to preserve its local reserves as part of its multi-year plan to improve food security in the giant country. For the time being, this export ban is expected to remain in effect until June 2022. The Chinese government’s directive has also exacerbated the global shortage of raw materials for fertilizers and contributed to price increases, being the largest potash producer in the world.
According to Chinese customs data, as a result of the move, last August, Chinese fertilizer exports fell by 26.3% from a month earlier, to 2.8 million tons. In terms of potash reserves, China is ranked second in the world with 5% of all world reserves, while Morocco is ranked first, with 70%. In Russia, ranked fifth, there are 2% of global potash reserves.
Even before the invasion of Ukraine, global food prices reached a decade high, after the corona plague disrupted marine activity, and harsh climatic conditions in certain growing areas hit crops. According to the UN Food and Agriculture Organization, published last weekend, in February there was a 20.7% jump in prices compared to the same month last year, this led by vegetable oils and dairy products. 135.4 points in January.
Even before the invasion of Ukraine, global food prices reached a decade high, after the corona plague disrupted maritime transport, and harsh climatic conditions in certain growing areas hit crops.
The deterioration of food security is particularly acute in Latin America, in countries like Brazil, where inflation has led to a surge in rental and electricity prices and left families with very limited ability to purchase food. The exorbitant costs of the fertilizers will also prevent Brazilian farmers from increasing grain production in order to compensate for the shortage caused by the halt in exports from Russia and Ukraine – from the world’s largest suppliers of wheat, barley and corn.
“Brazil has the technology to produce,” Antonio Galvan, a farmer who heads the Brazilian Soybean Producers’ Association, told the Wall Street Journal. “Now with these sanctions, the price of fertilizers will skyrocket so sharply that it would not be worthwhile to plant the crops,” he concluded. According to the Fitch rating agency, while Brazil has a low dependence on wheat and corn imports from Russia and Ukraine, the spike in world prices will adversely affect local producers of corn-based food and ethanol.