June 30, 2022 | International Agricultural Trade Report
The geopolitical conflict between Russia and Ukraine is impacting global supply of fertilizers and food. Russia originally imposed restrictions on nitrogen, phosphate, and potash fertilizer exports until June 2022, effectively removing nearly 15 percent of the global supply. Although these restrictions were announced, the actual imposition of the restrictions is unclear, because Russia stopped publishing trade data. According to Trade Data Monitor, there are no records of fertilizer exports from Russia since January 2022. However, many countries, including the United States and Brazil, have reported fertilizer imports from Russia through April 2022. The uncertainty surrounding Russia’s fertilizer supply will likely cause prices to remain elevated until the Russia-Ukraine war ends, because ramping up fertilizer production takes an average of three to five years if the necessary reserves are available. However, phosphate and potash reserves are limited in several countries. Some countries have imposed import restrictions as a part of their sanctions on Russia. On April 8, the European Union imposed quotas on importing certain fertilizers as a part of a package of sanctions. Although these sanctions will not take effect before July 2022, they are likely to maintain and increase pressure on the global fertilizer market. The United States has also imposed restrictions on Russia, restricting access to pipeline parts and other inputs that may be vital in their fertilizer production process. However, although the European Union and the United States have some sanctions on Belarusian fertilizers, the United States has no direct sanctions on Russian fertilizers. Russia's invasion of Ukraine has resulted in a halt in Ukrainian fertilizer production. Although Ukraine is a relatively small fertilizer producer, according to the International Fertilizer Association, it produced 1.58 million metric tons of fertilizer in 2019 and supplied more than 75 percent of its domestic nitrogen consumption. In addition, in 2021, 65 percent of Ukrainian imported fertilizers came from Russia and Belarus. Although Ukrainian farmers continue to plant crops in 2022, their available fertilizers were mainly purchased in 2021. Given Ukraine’s position as a major grain and oilseed exporter, fertilizer shortages could further decrease Ukrainian production, which would have impacts on global food security.
Implications of Fertilizer Price Increases for the United States and the World The increase in fertilizer prices has strained U.S. producers and in other countries. While the United States produces a significant amount of nitrogen and phosphorus, it imports a significant amount of fertilizer, especially potassium fertilizer. However, the global shortage of fertilizer is likely to keep fertilizer prices elevated in the United States. Although fertilizer prices began rising in 2021, many U.S. producers were able to avoid the surge in fertilizer prices, because the fertilizers used for this year’s planting season were purchased in 2021. Cases in which fertilizer was purchased in 2022, many producers had to appropriately adjust their fertilizer mixes to match the planted crop acreage, minimizing their fertilizer expenditures. Some producers may have increased their soybean, acreage planting because soybeans require less fertilizer. This is because soybeans have a natural nitrogen fixing capability. The decision also reduces the acreage necessary to plant corn and other grains. Nitrogen fertilizer tends to be used for corn and other grains more so than other row crops. In response to high input costs, some producers may have chosen to reduce the overall acreage planted, while others chose to maintain acreage but change crop mix or modify other practices. Given the current relatively high prices of commodities—corn, wheat, and soybeans—reasonable profit margins are possible, despite the high input (fertilizer) prices. Producers in other countries are faced with similar decisions as the United States. Brazil has already experienced a 15-percent year-over-year reduction in first quarter 2022 fertilizer imports. This could negatively impact its second corn crop production for 2022. The SSA countries have already seen a reduction in their fertilizer use due to the short supplies, low stocks, and high prices. The SSA countries already have very low fertilizer application rates. Reducing these rates further could negatively impact crop yields, threatening food security for some of the more vulnerable populations. The global outlook for 2023 may be even more dire. As the Russia-Ukraine war continues and the supply of fertilizer remains limited, high prices are likely to have a more profound impact on 2023 planting decisions. Producers in the United States may be able to increase production, despite commodity prices remaining high, but will have to grapple with the expectedly high input prices for commodities. Link to Report