- Western sanctions on Russian and Belarussian exports, and Chinese export restrictions have created turmoil in the global fertiliser market.
- Buyers have been busy this year finding alternative suppliers due to the sharp drop in fertiliser exports from Russia, Belarus, China, and the European Union.
- Favourable weather conditions in the major growing regions during the season can ease some of the impacts of under-fertilisation, while bad weather can cause more problems.
Fertilisers are essential in plants’ growth, which provides nutrients to the soil, leading to production efficacy and more optimum food production. Potassium, phosphorus, and ammonia are the primary nutrients for plant growth and these should be in the right quantity for healthy crops.
Fertilisers are imported and exported across international borders. According to our data, global exports of fertilisers totalled USD 83 billion and imports totalled USD 97 billion in 2021. Western sanctions on Russian and Belarussian exports, and Chinese export restrictions have created turmoil in the global fertiliser market.
High Fertiliser Prices
Russia’s invasion of Ukraine, followed by Western sanctions on Russian and Belarussian exports, and Chinese export restrictions have created turmoil in fertiliser markets. The surge in fertiliser prices that began in 2021 led to deteriorating farmer affordability during 2022 and lower demand.
Uncertainty about the amount of fertiliser that farmers are going to need for the upcoming season leads to a more muddied outlook for next year’s crop yields. As a result, the future of commodities will have an upward effect. Although the urgency of the situation for worldwide food security is increasingly being recognized, there are reasons to be cautious about any quick improvements in the situation.
Considerable Shifts In Fertiliser Trade
Global buyers of fertiliser have been busy this year finding alternative suppliers due to the sharp drop in fertiliser exports from Russia (nitrogen, potash), Belarus (potash), China (nitrogen, phosphate), and the EU (nitrogen). The global supply chain from these countries has been affected due to the Russia-Ukraine and Chinese export restrictions.
In the European Union, lower local ammonia and urea production in combination with a reduced inflow of Russian products has been partially offset by imports from other countries such as Egypt and Algeria. Here is a data visualization of fertiliser exports from Russia, Belarus, China, and the European Union.
Meanwhile, Brazil, China, and the United States have not turned away from Russian fertilisers and absorbed some of the flows that have become available, as they have generally worked out how to deal with any additional red tape.
EU Is Turning To Other Countries For Ammonia Imports
The European Union is now turning to other countries for ammonia imports due to sanctions imposed on Russian exports. According to our data, the EU countries imported ammonia worth USD 2,166 million in 2021. Other than Russia, the EU’s major sources of ammonia are Algeria, Trinidad and Tobago, Netherlands, Germany, Ukraine, and Egypt. See the chart to get a visualized view of data recorded in 2021.
Prospects For 2023
Driven by high prices, producers across the globe will have to ramp up production of fertilisers in 2023 at existing sites and increase investments in new capacity which has a downward effect on prices. Still, it’s likely that part of the supply gap next year will remain.
Geopolitics is a major factor in how the market will evolve in 2023 as European sanctions on exports from Russia and Belarus are particularly influential. If the war in Ukraine escalates, further tightening of sanctions cannot be ruled out.
Impact On Food Production
According to our analysis, the impact of the increase in fertiliser prices on crop yields has been soft this year as many farmers purchased fertiliser ahead of the season at affordable rates at the start of 2022 despite high commodity prices.
However, during the course of 2022, fertiliser imports in major markets such as Brazil have dropped below the levels of the previous year. The impact on yields could become more pronounced in 2023, especially in Asian and African countries where farmers have generally fewer means to adapt and get less government support compared to their counterparts in China, Europe, and the United States.
Other than this, it is hard to match the effectiveness of synthetic fertilisers as the weather plays an important role in yields during different seasons. Favourable weather in the major growing regions during the season can ease some of the impacts of under-fertilisation, while bad weather can cause more problems.