Here’s how Russia’s Invasion of the Ukraine is affecting Fertilizer Prices & Supply

Just as many countries around the world recover from the Covid-19 lockdowns, along comes the conflict in the Ukraine to disrupt markets and further slow-down global growth. Russia’s invasion of the Ukraine has caused a ripple effect that will most certainly be felt by fertilizer suppliers, South African farmers, and consumers alike.  

Fertilizer prices were already a huge worry for SA farmers and at record high prices even before Russia invaded the Ukraine. Limited fertilizer stockpiles, supply chain disruptions, natural gas shortages, and the pandemic, have all played a part in elevating fertilizer prices during the past year and a half.  

European fertilizer facilities shutting down

The high prices of natural gas led to quite a few European fertilizer facilities shutting down as it was just not economical for them to continue producing. Should gas prices continue to elevate, many more facilities may just have to close up shop. Those who manage to stay in operation may be forced to increase production costs which will in-turn put pressure on the fertilizer price.

Tighter fertilizer supplies could unfortunately lead to further price hikes. It is our sincere hope that suppliers do not take advantage of the situation and unfairly increase their prices. Although we cannot forecast prices, the increased price of gas and the on-going Russian/Ukraine conflict leads us to believe that prices will definitely elevate.

Imminent Fertilizer Price Hikes

Following the Russian invasion of Ukraine, fertilizer suppliers and farming communities across South Africa and the globe are fearful and uncertain about what the future holds in terms of pricing and supply disruption. With Russia now being slapped with sanctions, they are bracing themselves for shortages and imminent price hikes. The impact to the South African agricultural sector could be huge and something that could take many years to recover from.

Russia is one of the top ten potash-producing countries in the world coming in second after knocking Belarus into third during 2020. The primary market driver for potash is the fertilizer industry and it is crucial to crop yield and quality.

  1. Canada – 14 million metric tons
  2. Russia – 7.6 million metric tons
  3. Belarus – 7.3 million metric tons

Russia is also a primary producer of potassium (K), nitrogen (N) and phosphorus (P) These are the three main commercial fertiliser nutrients.

Sharp Rise in Urea Prices

Disruptions such as excluding some Russian banks from global payment systems such as SWIFT, adds further pressure to the already high global fertilizer prices. In January of 2022, the prices of di-ammonium phosphate, ammonia, urea, and potassium chloride rose sharply. The price of Urea rose by as much as a staggering 148%. Should the imposed sanctions on Russia cause their exports to suffer, there will be added pressure on the already high fertilizer prices.

Even though South Africa is the 36th largest fertilizer materials market for Russia, this does not exclude us from price increases in international markets. In the short-term, many farmers who have not secured fertilizer supplies are worried about the approaching planting season and the impact the fertilizer price could have on their business. Winter crops such as barley, wheat, and canola are due to be planted at the end of April.

Sanctions against Russia likely to disrupt Fertilizer supplies

With Russia exporting a whopping $51.8M in mixed mineral and chemical fertilizers to South Africa in 2019, the current conflict with the Ukraine will have dire implications for South Africa and its food security. Likely sanctions on ammonia and urea are bound to disrupt Russia’s supply which will in-turn, significantly reduce supplies globally.

Currently, local fertilizer importers and suppliers have closed their order banks with immediate effect as of Friday 25th February. They have advised their customers that they will reopen once they know what the world markets are doing. At present, fertilizer suppliers may have some supplies but are still awaiting other products.

What can the SA Farmer do?

There is no doubt that the war on Ukraine will be painful for the global food system and farming in general. Poor and developing countries tend to be hit the hardest. With numerous farmers around the world suffering the negative effects of the Covid19 pandemic, the last thing they need is a shortage of fertilizer and an increase in prices.

During wars, invasions and conflicts, food shortages are inevitable and threaten the livelihood of entire nations. What can South African farmers do? We will caution you not to panic buy as this tends to aggravate the situation. Instead, get in touch with your preferred fertilizer supplier to make sure that sufficient fertilizers are available for your planting season. We never know what the future holds but we can limit the factors that prevent us from progressing.