With Russia sanctions, fertilizer shortages threaten global food supply

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The skyrocketing prices of fertilizers lead farmers around the world to reduce the use of the input and the planted area, consequences of the Ukraine-Russia conflict that warn of risks of food shortages, according to experts in the agricultural sector.

Western sanctions against Russia, a major exporter of potash, ammonia, urea and other soil nutrients, have halted shipments of these important inputs around the world. Fertilizer is critical to maintaining high yields of corn, soybeans, rice and wheat. Producers are looking to adjust.

The focal point can be seen in Brazil, an agricultural powerhouse where some farmers are applying less fertilizer to their corn, and some lawmakers are pushing to open up protected indigenous lands to potash mining.

In Zimbabwe and Kenya, smallholder farmers are returning to using manure to nourish their crops. In Canada, a canola farmer has already stocked up on fertilizer for the 2023 season, anticipating even higher prices ahead.

Farmers elsewhere are making similar moves. Reuters spoke to 34 people on six continents, including grain producers, agricultural analysts, traders and agricultural groups. All expressed concern about the cost and availability of fertilizers.

In the United States alone, fertilizer bills are expected to jump 12% this year, after a 17% increase in 2021, according to data from the American Federation of Agriculture and the US Department of Agriculture (USDA).

Some growers are considering switching to crops that require less nutrients. Others plan to cultivate less acreage. Others say they will simply use less fertilizer, a strategy that experts predict will hurt yields.

Production is at greatest risk in developing countries, whose farmers have fewer financial resources to weather the crisis, said Tony Will, chief executive of Illinois-based CF Industries Holdings, a leader in nitrogen fertilizer production.

“My concern right now is actually a global food crisis,” 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 planted areas have dropped 0.2% since August due to higher fertilizer prices, and that the volume of grain imported into Peru for animal feed has also declined due to cost concerns. The government is now drawing up a plan to increase the country’s food supply.

double hit

Global fertilizer prices were already high before Russia’s invasion of its neighbor on Feb. 24, with record prices for natural gas and coal forcing some fertilizer manufacturers to cut output in an energy-hungry sector. Cities in Ukraine are besieged by missiles, tanks and troops in what Moscow called a “special operation” to demilitarize the country. Russia denies targeting civilians in the conflict.

Western nations have responded with tough economic sanctions on Russia, and the United States and the European Union have imposed new sanctions on Belarusian President Alexander Lukashenko, who has supported Russia’s offensive.

Together, Russia and Belarus accounted for more than 40% of global exports of potash last year, one of three essential nutrients used to boost crop yields, Dutch Rabobank said this month.

In addition, Russia accounted for about 22% of global ammonia exports, 14% of urea and about 14% of monoammonium phosphate (MAP) – all important types of fertilizers.

The sanctions have hurt Russian fertilizer and crop sales. Many Western banks and merchants are avoiding Russian supplies for fear of running afoul of rapidly changing rules, while shipping companies are avoiding the Black Sea region due to security concerns.

All of this amounts to a double whammy for the global food supply.

Russia and Ukraine are major grain producers. Together they account for about 30% of global wheat exports and 20% of corn exports. Grain shipments through the Black Sea have already been halted. Stalled deliveries from these two countries helped spur global food inflation.

But the fertilizer crisis is in some ways more worrisome because it could inhibit food production in the rest of the world, said Maximo Torero, chief economist at the United Nations Food and Agriculture Organization.

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

Brazil at risk

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

Before the Ukraine-Russia conflict, Brazilian farmers were already cutting back on maize crops due to rising fertilizer prices. Soybean cultivation is also likely to be impacted, with producers expanding more slowly than in previous years, according to Agroconsult.

In Mato Grosso state, farmer Cayron Giacomelli told Reuters he has already reduced the use of fertilizers in his current corn crop. He said he would do the same when planting soybeans later this year, a move he believes could reduce his harvest by at least 8%.

Giacomelli said it is difficult to get fertilizer and that some dealers will not finalize sales until cargo ships dock in Brazil. He is still regretting not closing a purchase he was negotiating just before Russia invaded Ukraine. “I got distracted and now I’m paying more,” said Giacomelli.

Meanwhile, lawmakers from Brazilian agricultural states are pushing for legislation that would open up indigenous lands in the Amazon to potash mining. This measure is contested by members of the local Mura community, who say mining would steal the natural habitat on which they depend.

Fewer acres, less fertilizer

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

Berry said he plans to cut his corn crops in the spring for cattle feed to about 300 acres from his usual 400 to 600 acres. He stated that it will also reduce liquid nitrogen applications by about 30%, which can decrease your productivity by 25%.

Conclusion: “Let’s produce less,” he said.

This may seem contradictory considering that commodity prices have risen sharply in recent weeks.

But the cost of growing it is outweighing the potential income for many farmers.

“Planting decisions are increasingly being made not based on market fundamentals, but rather on the cost of production driven by fertilizer price and supply,” dozens of U.S. lawmakers wrote in a March 17 letter to the Commission on US International Trade.

They sought tax relief on fertilizer imports from Morocco and Trinidad and Tobago.

Source: CNN Brasil

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