The lack of fertilizers has added to growing concerns about the effects of the war in Ukraine on the price and scarcity of certain staple foods. Together, Russia and Belarus accounted for about 40 percent of global potash exports, according to Morgan Stanley. Russia’s exports have been hit by sanctions. Furthermore, in February, a major Belarusian producer declared force majeure – a statement that it would not be able to keep its contracts due to forces beyond its control. Russia also exported 11% of world urea and 48% of ammonium nitrate. Russia and Ukraine together export 28% of their nitrogen and phosphorus fertilizers, as well as potassium, according to Morgan Stanley. Interruptions to these missions due to sanctions and war have sent fertilizer prices soaring. High grain prices are rising even more. “It’s a huge problem,” Tony Will, CEO of CF Industries, told CNBC in a recent appearance. He said global supplies of fertilizers were very limited. CF produces and distributes fertilizers. “It’s an influx of factors, an unprecedented demand combined with a huge drop in supply availability, which has only been exacerbated by the war in Ukraine and what is happening with exports from Russia and Ukraine,” Will added.
Contributes to higher costs and shortages
“All of this is double, if not triple,” said Bart Melek, global head of commodity strategy at TD Securities. “We have geopolitical risk, higher input costs and basically shortages.” “Agriculture will definitely be affected. In the case of Canada, it is good for Saskatchewan, which is the largest producer of potash in the world, but farmers will be hurt because they will pay much more per acre,” Melek said. simply because they save money, especially in emerging markets. “ Grain shortages will increase the cost of staple foods and other commodities. “This will lead to higher input costs for the production of everything from grains, wheat and corn. Input costs are higher now because you will have a rarity that will increase the price as well,” Melek said. Meanwhile, prices for cows, oxen and pork bellies have also risen significantly, he added. Some fertilizers have more than doubled in price. For example, Melek said potash traded in Vancouver was priced at around $ 210 per metric ton in early 2021 and is now valued at $ 565. He added that urea for delivery to the Middle East was trading at $ 268 per metric ton at the Chicago Board of Trade in early 2021 and was valued at $ 887.50 on Tuesday. Will said CF Industries operates its factories around the clock, giving up any maintenance and trying to expedite shipments to areas in need. “There are no new tonnes to produce. All we need to do is try to bring them to market as fast as we can,” he said. Just as the price of fertilizers has soared, so has the price of agricultural products soared amid fears of shortages. “We are absolutely dealing with a catastrophic problem here,” Will said. “It is not just a matter of lack of availability and affordability of nutrients and inputs, but Russia and Ukraine have historically exported about 30% of the world wheat trade and 20% of the world corn trade.” He added that there are stocks of these goods that do not go on the market because the Black Sea is closed.
Prices for wheat, corn and soy are rising
Wheat futures in July fell slightly on Wednesday. They rose about 4% on Tuesday due to concerns about Ukraine but also about the worse-than-expected growing conditions in the US. Corn futures rose nearly 30 percent from a date on the Chicago Board of Trade on Wednesday. Soybean futures contracts were also slightly lower. Morgan Stanley expects grain prices to remain above last year’s levels until 2023. “Before the war in Ukraine, the dry weather [Latin America] “It brought stocks to levels that would have already kept grain prices high,” Morgan Stanley analysts wrote in a report. “The war adds uncertainties related to the supply of Ukrainian corn / wheat and, more importantly, the use of fertilizers and world yields,” they said. “Because of this, our basic crop price scenario implies a 2-3% reduction in yields in higher cost areas, with the risk of greater disruption depending on fertilizer availability and weather conditions.” Morgan Stanley analysts said they expect higher prices in 2022 and 2023, but after that they expect stocks to normalize with more supply from Latin America. They also expect prices to be more in line with production costs and fall 15% to 20% below longer-term soybean and corn contracts. Zoom Icon Arrows pointing outwards Melek said corn grew 57% in 2021 and could be volatile this year, rising 25% on average on an annual basis. Live cattle prices rose 19% last year and could rise another 15% in 2022. Wheat rose 27% in 2021 and could fall 22% this year, he said. Melek said the high prices were due to limited supplies and shortages. “We are talking about an erosion of food security on a scale we have not seen in a long time and I think it will reach people in the lowest income distribution in North America,” he added. Melek said farmers are likely to consider switching to bodies with lower fertilizer intensities and will save on the amount of nutrients they use. “Consumers will also make choices,” he said. Fertilizer production is based on natural gas, and this has made a difference to US producers. The biggest buyers of the top three types of fertilizers are Brazil, India, the US and China, according to Morgan Stanley. “Being a North American producer is huge for us. We pay somewhere in the neighborhood from $ 5 to $ 6 per million British thermal units. [MMBtu] “Europe pays $ 35 to $ 38 per MMBtu… This is a huge difference between low-cost production and one of the reasons why the price of fertilizers is what it is.” “Not only is there a lack of availability, but high-cost producers have very high costs.” For some farmers, expensive or unavailable fertilizer means that crops may not be feeding as much this year. In turn, the odds could be lower. “In close contact with several of our customers in Latin America, we will start exporting on a humanitarian basis just to bring nutrients down there to an area that is a rich growing area, but also hungry for nutrients right now.” he said. The will of CF.
