Bloomberg — Fertilizer prices continue to surge as supply upheaval from Russia leaves governments struggling to secure vital crop nutrients, adding to concerns that record global food inflation will accelerate.
The Green Markets North American Fertilizer Index jumped 16% Friday to a new high. Prices for the widely used nutrient urea in New Orleans soared 22%, also reaching a record. And an index for potash in Brazil rocketed a record 34%.
Russia is a huge low-cost exporter of every major kind of crop nutrient. The country urged domestic fertilizer producers to reduce exports earlier this month, stoking fears of shortages. The war also is pushing up the cost of natural gas, the main input for most nitrogen fertilizer, forcing some producers in Europe to cut output.At the same time, prices for staple crops like wheat and corn are soaring, as war in one of the world’s breadbaskets threatens to push millions more into hunger.
“It’s a slow-moving disaster,” said Alexis Maxwell, an analyst at Bloomberg’s Green Markets.
Countries that would normally import from Russia are working to secure supply. Brazil, the top fertilizer importer, will propose excluding crop nutrients from sanctions imposed on Russia in a meeting at the United Nations’ Food and Agriculture Organization next week. The plan has support from Argentina and other South American countries.
Brazil wants “to secure global food security,” Tereza Cristina, the country’s agriculture minister, said Friday at an event. She will meet FAO’s general director, Qu Dongyu, on March 16.
Brazil, an agriculture superpower that leads soybeans, coffee and sugar exports, is reliant on fertilizer imports to produce food. The nation currently imports 85% of its fertilizer consumption, with Russia as its main supplier. For nitrogen and potash, the dependence on imports exceeds 90%.
The government is now addressing the issue. On Friday, it launched a national plan aiming to reduce imports to 45% of fertilizer use by 2050. The plan, which has been designed for over a year, includes measures to encourage local production such as increasing the offer of credit lines, changes to tax polices and logistic improvements. But those are all long-term measures that will bring little relief to the fertilizer shortage caused by the war. For the short-term, the minister is intensifying the “fertilizer diplomacy,” she said.
Cristina will travel to Canada Saturday in an attempt to ensure potash supplies, and recently visited Iran. On Thursday, she met ambassadors from Arab nations that could increase fertilizer supplies to Brazil.
“The diplomacy with producing countries may slightly increase imports, but it will not make up for the lack of Russian imports as the entire market is tight,” said Luigi Bezzon, an analyst at StoneX in Campinas, Brazil.
Less than a third of the crop nutrients needed for summer plantings starting in September have been bought so far, according to Bezzon. “It’s unlikely that Brazil will be able to repeat the same fertilizer use seen in the past season,” he said.
Rising prices are stoking concerns that the few companies that work in fertilizer and other crop inputs could take advantage of the price squeeze. The U.S. Department of Agriculture announced Friday it is seeking information on competition in the fertilizer, seed, farm input and food wholesale and retail markets as part of a public inquiry into concentration in the industries.
“As I talk to farmers, ranchers and agriculture and food companies about the recent market challenges, I hear significant concerns about whether large companies along the supply chain are taking advantage of the situation by increasing profits — not just responding to supply and demand or passing along the costs,” Agriculture Secretary Tom Vilsack said in a statement.
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