A perfect storm hit theagriculture because ofexplosion in the cost of fertilizers, with the prices of phosphates, urea and potassium having increased respectively by 190%, 170% and 280% in the last two years. To push them to these unsustainable levels were affected above all by the supply disruptions after Covid-19the export sanctions from Belarusthe war between Russia and Ukraine and the restrictions on Chinese exports. One situation, highlights the recent report S&P Global Ratings “The Russia-Ukraine war is reshaping the fertilizer industry”, Which resulted in a first effect increased profits of fertilizer companies and to an improvement in their credit quality, it also has destroyed the demand of farmerswho cannot afford to pay these prices for fertilizers, thus also increasing thefood insecurity around the world. For this reason, the need to reduce dependence on Russia, the largest fertilizer exporter in the world. However, the need to invest to end dependence on Russian and Belarusian fertilizers is hampered by high inflation, shortages of supplies and, in the case of nitrogen ones, uncertainties about the configuration of new regulations for the decarbonisation of the sector.
For the report, the effects of the war between Russia and Ukraine are just the latest tile in an escalation that started with the pandemic and could affect the fertilizer industry globally for many years. To bring prices for the first time to all-time highs last year was theincrease in the cost of energy and gods transport occurred as the world’s population emerged from the pandemic. Then prices increased again due to the sanctions imposed by Europe on Belarus and the restrictions imposed by China on its exports of fertilizers, to protect domestic agriculture. Finally, with the war between Russia and Ukraine, the offer has significantly narrowed. Russia, Ukraine and Belarus are among the most important countries in the production of fertilizers and in the global food supply chain. Russia in particular exported about 14% of nitrogen fertilizers, 14% of phosphates and 21% of potash globally in 2021. This year, although the Russian fertilizer trade was not subject to official sanctions, the payment restrictions they made transactions more difficult, to which was added the decision of some transport companies to cut connections with the country.
In this price environment, especially emerging economies and small farms could reduce the use of fertilizers or switch to producing less nitrogen-intensive crops. According to the report, “the reduction in the use of fertilizers for an extended period it will reduce the yield and quality of crops, especially considering the intensive nature of agriculture to meet the growing demand from humans and for animal raw materials. This in turn will have a ripple effect on food safety ”.
The International fertilizer association (IFA) estimates that global fertilizer use decreased by 1.6% over the period 2021-2022 due to accessibility problems, changes in crop mixes and the war in Ukraine and predicts a further decline next year. “The profits and credit quality of fertilizer companies benefited from an excellent situation but” as he says Paulina Grabowieccredit analyst at S&P Global Ratings in the report, “high prices have made some farmers unable to afford fertilizers and, in turn, have increased food insecurity around the world.”CopyAMP code.