Content ID

324490

Potential impacts of the Russian invasion on the fertilizer industry

In the past year-and-a-half, the fertilizer industry has seen a multitude of challenges. Impacts stemming from winter freezes, Hurricane Ida, COVID-19, production costs, trade sanctions on various countries, and supply chain disruptions have hoisted the price of fertilizer up. On top of all those factors, producers are looking at potential price impacts from Russia’s invasion of Ukraine.

Russia accounts for 21% of the global potash market, according to Jason Troendle, director of market intelligence and research at The Fertilizer Institute. While the U.S. imports most of its potash from Canada, a country which produces 39% of potash globally, we also get 7.8% from Russia. Because it is such a major player in the global market, sanctions on Russia have a ripple effect on markets, says Troendle.

“U.S. farmers, as well as farmers in Brazil and India, are going to have to pay that global price,” Troendle says.

The magnitude of the ripple will depend on how many countries impose sanctions and how aggressive the sanctions are. Some countries may include fertilizer in their sanctions on Russia; some may not. Russia may use potash as a countermeasure and withdraw their willingness to trade.

Troendle says a secondary impact of what’s happening in Ukraine is on the energy stock. Europe receives about 40% of its natural gasses from Russia, and countries have already seen high natural gas prices at the end of 2021. 

“With high natural gas prices, quite a few fertilizer facilities shut down in Europe, because it wasn’t economical to produce,” says Troendle. “If gas prices continue to rise, Europe may have to shut down more facilities. That naturally puts upward pressure on price. Even if they are able to stay open in Europe, it is going to increase production costs.”

The ramifications of sanctions against Russia are still working themselves out, says Troendle. As planting season approaches, how this will impact the supply chain is a lingering question.

“There probably will be at least some disruption, whether that’s temporary or long-term is yet to be seen,” says Troendle. “What the U.S. does may look different than how Brazil takes a look at this or how India would approach its interactions with Russia.”

Agriculture Secretary Tom Vilsack spoke at the 2022 Agriculture Outlook Forum and said the biggest worry for American farmers were fertilizer prices. One of his points was that he hoped companies and groups would not take advantage of the situation and increase the prices unfairly. 

However, Troendle says there isn’t a precedent for this concern. 

“If you go back to 2008, we saw a run-up in prices, and the government looked into it,” Troendle says. “They identified consistent data that backed up the economic principles on both supply and demand that were really driving prices at that point.”

Looking at market conditions now, Troendle says many variables are once again impacting markets outside the control of a single fertilizer company. Fertilizer is an increasingly global market, 44% of it is exported, so when something changes in another country, it affects the prices of fertilizer in the United States.

“Unfortunately, there’s nothing anyone can do in the short term to either increase supply or decrease prices quickly,” says Troendle. “Fertilizer, like any other produced good, just takes time.”

Troendle encourages producers to work with trusted agronomists and retailers to test soil and ensure that they’re utilizing nutrients as efficiently as possible. Hopefully most producers have already purchased fertilizer for this growing season, so now it is important to maximize nutrition for their soil.

“I know folks are really looking for as many solutions as they can,” says Troendle. “We’re hearing from a lot of folks, and we recognize and acknowledge this is a really tough time for people, particularly growers.”  

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