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Global Fertilizer Supply Shrinks Amid Sanctions Against Russia and Belarus

Global Fertilizer Supply Shrinks Amid Sanctions Against Russia and Belarus

The global fertilizer supply chain will be bracing for a shortfall due to sanctions and restrictions imposed on Russia and Belarus, while the two countries’ potassium fertilizer exports combined are about 40 percent of the global market.

Following western sanctions against Russia for its escalating invasion of Ukraine, the world’s three largest container shipping companies, Switzerland’s MSC, Denmark’s Maersk, and France’s CMA CGM, announced on March 1 the suspension of all cargo bookings to and from all Russian ports, including that in the Baltic Sea, Black Sea, and Far East Russian regions. Food, medical, and humanitarian supplies are exceptional.

The simultaneous move is another heavy blow to Russia’s exports.

The Fertilizer Institute (TFI), an organization focused on the fertilizer industry, raised concerns in a March 3 statement that “the removal of Russian product from the global marketplace will have an impact on supply,” due to Russia’s major role in the global fertilizer market.

The report said Russia is the second-largest producer of nitrogenous fertilizers (ammonia and urea) and potassium fertilizers in the world, and the fifth-largest producer of phosphate (phosphate fertilizer). In the global export market, Russia accounts for 23 percent of global ammonia exports, 14 percent of urea (carbamide) exports, 21 percent of potash (a fertilizer made of potassium) exports, and 10 percent of processed phosphate exports.

In addition, Russia is the world’s second-largest producer of natural gas, with a quarter of the global supply share, while natural gas is the main raw material for nitrogen fertilizers.

Nitrogen, phosphorus, and potassium are the three major nutrients that promote the growth of crops, so chemical fertilizers supply is crucial to the agricultural production of each country.

On March 2, the French E.U. Presidency announced that the E.U. had decided to impose sanctions on Belarus for its role in supporting the Russian invasion of Ukraine, banning exports of timber, steel, and potash to E.U. countries.

The U.S.-sanctioned Belarus Potash Corporation (BPC) accounts for one-fifth of global potash exports, and together with Russia, the two countries have a combined share of more than 40 percent of the global potash market. If the sanctions continue, the global potash supply may face a huge scarcity.

Russian President Vladimir Putin said on March 10 that attempts by Western countries to block the export of fertilizers, oil, natural gas, and metals from Russia would have serious consequences worldwide.

China’s Additional Demands for Fertilizer

In 2022 the demand for fertilizers in China will be high, in order to overcome late sowing, said Tang Renjian, Chinese Minister of Agriculture and Rural Affairs on March 5. He said that in 2021, five provinces in northern China including Hebei, Shandong, Henan, Shaanxi, and Shanxi suffered from rare autumn floods, and as a result, one-third, or 110 million mu (18 million acres) of winter wheat was sown half a month later than normal.

According to the official agriculture site, extra nitrogen fertilizers, as well as phosphate and potassium fertilizers need to be applied to wheat during the greening, elongation, and grain filling periods, in order to ameliorate a potential grain harvest crisis.

China is seriously reliant on the external supply of potash, one of the major chemical components of fertilizer. According to an analysis by Chinese media, in 2021, the country’s dependence on potash fertilizer is between 50–60 percent, among which, potassium salt imports from Canada, Russia, and Belarus exceed 80 percent.

State-run Everbright Securities said (pdf) in a report on Feb.24—the same day Russia launched the invasion of Ukraine—that with the implementation of sanctions against Russia in Europe and the United States, there would be a significant global shortage of fertilizer, which in turn would raise global fertilizer prices. They speculated that this would be beneficial for Chinese fertilizer companies.

Fertilizer prices are surging on the Chinese market.

March 7 data by the Agricultural Means of Production Association showed the wholesale price of urea had risen by nearly 30 percent, the price of diammonium phosphate had increased by 15 percent, and the price of potassium chloride had soared 90 percent year-over-year.

Six South American Countries Request No-Fertilizer-Sanctions

Global Fertilizer Supply Shrinks Amid Sanctions Against Russia and Belarus
Combine harvesters crop soybeans in a field at Salto do Jacui, in Rio Grande do Sul, Brazil, on April 7, 2021. (Silvio Avila/AFP via Getty Images)

Reuters reported that on March 10, Brazil’s Agriculture Minister Tereza Cristina Dias said that six South American countries including Brazil, Argentina, Bolivia, Chile, Paraguay, and Uruguay would submit a proposal to the U.N. Food and Agriculture Organization to exclude fertilizers from sanctions against Russia.

Fertilizer shortages will lead to food inflation and undermine food security, Dias said.

Brazil is one of the world’s largest fertilizer importers, relying on imports for 85 percent of its fertilizer use. In 2021, Brazil imported about 40 million tons of fertilizer products, nearly a quarter of which (9 million tons in total) came from Russia.

Brazil’s and Argentina’s summer crops are mainly fertilizer-dependent corn and cotton, and thus rising prices, as well as an unstable supply in fertilizer, will lead to higher costs and lower yields, which will have a knock-on effect on the two nations’ exports, according to Bric, a Chinese consulting company.

In addition, the grain-producing country of India is also likely to be affected by a shortage of fertilizers.

US Planting May Shift From Corn to Soybeans

In the United States, some institutions expect that the spike in fertilizer prices may trigger a shift in U.S. crop planting from corn to soybeans.

Corn is a fertilizer-intensive crop. Stats from the S&P Global Commodity Index last December said that corn would be more costly to grow than soybeans in 2022 as fertilizer price indexes reach record highs. As a result, farmers may switch to planting soybeans, an alternative that would require less fertilizer.

The U.S. 2022–2023 soybean harvest is expected to reach 36.1 million hectares, an increase of 1.2 million hectares, while the corn harvest will decrease by 1.2 million hectares, down to 33.2 million hectares, S&P Global Platts Analytics said.

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