Russia’s invasion of Ukraine is adding fuel to already soaring fertilizer prices at a time when planting of major crops critical to global supplies is getting underway around the world.
Russia is the world’s biggest exporter of fertilizers, but its war with Ukraine has disrupted shipping and driven up prices for natural gas, a key ingredient for fertilizer manufacturing. Western sanctions, including against Russian banks, could further curtail exports by constraining financing. Futures prices for urea fertilizer have jumped 32% since the invasion began on Feb. 24, while diammonium phosphate, or DAP, futures are up 13%.
Fertilizer prices had already more than doubled over the past 18 months, hitting US farmers as they prepare for the 2022 growing season. Meanwhile, farmers in Brazil, one of the world’s top corn exporters, are still planting that country’s big safrinha, or second crop, of corn. Brazil relies heavily on Russia for imports of nitrogen fertilizer, which will be needed in many fields after the corn has emerged.
Ammonium nitrate and urea, the two main sources of nitrogen fertilizer, are the most used fertilizers in the world.
Potash exports from Belarus, a Russian ally, also have been disrupted, and Western sanctions against the country are due to expand in coming weeks. Potash is a key nutrient for major commodity crops like corn and soybeans, along with fruits and vegetables.
A prolonged disruption to the global supply of nitrogen and potash nutrients could cut into crop production in many parts of the world, for both the 2021/22 marketing year as well as 2022/23, at a time when food prices are already at record highs. In addition, damage to infrastructure and the difficulty of farming during an armed conflict could impair Ukraine’s ability to produce and export important agricultural commodities, especially wheat, sunflower, and corn.
Markets are counting on bumper harvests in the upcoming North American season to help replenish dwindling global stocks of many commodities. But as US farmers get ready to begin sowing crops soon, they face sharply higher input costs.
Fertilizer expenses in North Dakota, for example, are more than twice year-earlier levels. That’s expected to depress 2022 net profit per acre by 20% compared with last year for corn farmers in the southeast part of the state, while soybean farmers should see a 6% increase in net profit on a per-acre basis.