Why the fertilizer market could be Russia’s hidden leverage
Economists and policymakers say Russia may have some thus far hidden leverage on Ukraine — and the global food supply.
They worry that self-imposed export restrictions on fertilizer by Russia, the top global provider of the product, could further drive up the cost of food and damage global harvests in 2023 and beyond.
Russia’s invasion of Ukraine has been a factor in the 30 percent surge in international food prices and 10 percent rise in U.S. food prices over the last year, as supply chains continue to sputter in the wake of the coronavirus pandemic.
But the price pressures exerted on agricultural markets by Ukrainian exports like wheat and sunflower oil have been so far mostly caused by issues with their transportation, with cargo ships stuck in blockaded ports that Russian authorities say need to be cleared of mines.
A shift in Russian fertilizer policy could go a step further, leading to problems with food production in addition to distribution.
“If the fertilizers don’t flow, then the world will produce less,” United Nations Food and Agriculture Organization (FAO) chief economist Máximo Torero said in an interview. “That’s why we’re saying that next year we could have a problem of food availability, and also of food access like what we have today.”
Lower use of fertilizer results in lower crop yields regardless of supply chain issues, Torero said.
“That’s what will create the problem of food availability [in addition to] food access. That’s what worries us, that’s for us the most dramatic scenario. And that’s what we need to avoid,” he added.
Even without an export restriction, international companies have been hesitant to purchase fertilizers from heavily sanctioned Russia, which is the world’s top exporter of soil additives containing nitrogen, as well as those with phosphorus and potassium — all byproducts of the vast Russian energy industry.
In 2019, Russia exported 5.5 billion kilograms of these fertilizers, more than double the amount of the second biggest exporter, the European Union, and nearly four times as much as third biggest exporter, Belgium, according to figures from the World Bank.
“Fertilizer has, as you know, has become a huge problem, and Russia is a large fertilizer exporter. They just need to open up their own markets and end this war, end the blockade that they are responsible for and allow food to flow,” U.S. Ambassador to the U.N. Linda Thomas-Greenfield told the BBC last month.
Russia, for its part, sees a contradiction in the Western position of levying aggressive sanctions against the country while at the same time demanding commercial access to its agricultural commodities and energy byproducts.
“The EU openly declared an all-out economic and trade war against our country — in full oblivion to Russia’s standing as a key global supplier of basic agricultural products (wheat, barley, sunflowers, mineral fertilizers and fodder crops), including to low-income countries, that are subject to risks of food shortages,” the Russian foreign ministry said in a statement. “Instead of making groundless allegations European leaders should rather turn their attention to redressing the systemic miscalculations in their own macroeconomic, monetary, trade, energy and agro-industrial policies.”
Economists and policymakers say Russia may have some thus far hidden leverage on Ukraine — and the global food supply.
They worry that self-imposed export restrictions on fertilizer by Russia, the top global provider of the product, could further drive up the cost of food and damage global harvests in 2023 and beyond.
Russia’s invasion of Ukraine has been a factor in the 30 percent surge in international food prices and 10 percent rise in U.S. food prices over the last year, as supply chains continue to sputter in the wake of the coronavirus pandemic.
But the price pressures exerted on agricultural markets by Ukrainian exports like wheat and sunflower oil have been so far mostly caused by issues with their transportation, with cargo ships stuck in blockaded ports that Russian authorities say need to be cleared of mines.
A shift in Russian fertilizer policy could go a step further, leading to problems with food production in addition to distribution.
“If the fertilizers don’t flow, then the world will produce less,” United Nations Food and Agriculture Organization (FAO) chief economist Máximo Torero said in an interview. “That’s why we’re saying that next year we could have a problem of food availability, and also of food access like what we have today.”
Lower use of fertilizer results in lower crop yields regardless of supply chain issues, Torero said.
“That’s what will create the problem of food availability [in addition to] food access. That’s what worries us, that’s for us the most dramatic scenario. And that’s what we need to avoid,” he added.
Even without an export restriction, international companies have been hesitant to purchase fertilizers from heavily sanctioned Russia, which is the world’s top exporter of soil additives containing nitrogen, as well as those with phosphorus and potassium — all byproducts of the vast Russian energy industry.
In 2019, Russia exported 5.5 billion kilograms of these fertilizers, more than double the amount of the second biggest exporter, the European Union, and nearly four times as much as third biggest exporter, Belgium, according to figures from the World Bank.
“Fertilizer has, as you know, has become a huge problem, and Russia is a large fertilizer exporter. They just need to open up their own markets and end this war, end the blockade that they are responsible for and allow food to flow,” U.S. Ambassador to the U.N. Linda Thomas-Greenfield told the BBC last month.
Russia, for its part, sees a contradiction in the Western position of levying aggressive sanctions against the country while at the same time demanding commercial access to its agricultural commodities and energy byproducts.
“The EU openly declared an all-out economic and trade war against our country — in full oblivion to Russia’s standing as a key global supplier of basic agricultural products (wheat, barley, sunflowers, mineral fertilizers and fodder crops), including to low-income countries, that are subject to risks of food shortages,” the Russian foreign ministry said in a statement. “Instead of making groundless allegations European leaders should rather turn their attention to redressing the systemic miscalculations in their own macroeconomic, monetary, trade, energy and agro-industrial policies.”
