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• Russia and Ukraine are among the world’s leading producers of agricultural commodities, with exportable supplies in the global food and fertiliser markets concentrated in a few countries. 
• Fertilizer prices have reached all-time highs due to supply shortages exacerbated by the Ukraine-Russia conflict, as well as a slew of other factors. 
• According to the United Nations Food and Agriculture Organization, Russia was the world’s top exporter of nitrogen fertilisers in 2021, and the second-largest supplier of both potassic and phosphorous fertilisers. • Prices for raw materials that comprise the fertiliser market — ammonia, nitrogen, nitrates, phosphates, potash, and sulphates — are up 30 percent since the beginning of the year, and now exceed those seen during the food and energy crisis in 2008.
• Trade between Russia and the rest of the world has not stopped, but it has been severely disrupted as importers and vessel charterers avoid the country in the aftermath of Ukraine’s invasion, according to CRU Head of Fertilizers Chris Lawson on Tuesday. 
• Russia, which accounts for approximately 14 percent of global fertiliser exports, has temporarily suspended outgoing trade, which is expected to have a significant impact on global food markets. High gas prices have resulted in a reduction in production in regions such as Europe, further constricting an already constrained market.
• Meanwhile, sanctions against Russia’s ally Belarus have significant implications for the potash market, with Russia and Belarus accounting for 40% of annual traded volumes. 
• Since the beginning of 2020, nitrogen fertiliser prices have more than quadrupled, while phosphate and potash prices have more than tripled.” Global economies are already dealing with historically high inflation, largely due to soaring food and energy prices. According to the United Nations Food and Agriculture Index, food prices are at an all-time high, and Lawson believes that a prolonged period of fertiliser shortage will have an impact on long-term farming yields. 
• Prior to the threat of reduced Russian and Belarus supplies, fertiliser prices were already under pressure from global supply chain disruptions, a Chinese export ban, and a Canadian rail strike.

Consequences’

“Food and fertiliser production have a high energy content due to mechanisation, industrialisation, and transportation, but they also compete with other industries for raw inputs: biofuel production, for example, diverts crops away from agri-food, while lithium-ion battery production requires chemicals used in P-fertiliser production.” 

New shipping and transportation challenges, as well as the impact of Russian sanctions on global supply, are expected to stretch global markets even further, similar to the 2008 global food crisis. 

Global food prices rose sharply in 2007 and into the first quarter of 2008, causing economic and political instability as well as social unrest in developed and emerging economies alike.

The impact will be “extremely asymmetric,” with food and fertiliser supply risks disproportionately affecting most emerging market economies. 

However, this does not mean that developed economies and investors will be unaffected, as punitive Russian and Western economic sanctions will inevitably reduce energy, grain, and fertiliser supplies.