in , ,

War in Ukraine’s fertilizer crisis may mean a global food shortage

As the world’s leaders gathered in New York this week for the annual United Nations General Assembly meetings, it was one of the more unlikely buzzwords: fertilizer.

It may not be top of mind for most heads of state, but in the midst of a global food crisis, concerns about the supply of this humble commodity — critical to the work of all farmers and food producers — have exercised the minds of food experts and policymakers alike. So much so that it rated a mention in the United Nations Secretary-General António Guterres’ opening remarks to the global meeting. “To ease the global food crisis, we now must urgently address the global fertilizer market crunch,” Guterres said, warning that inaction now could lead to a “global food shortage.”

The cause of the “crunch?” Russia’s war in Ukraine, which has affected global supplies of not just food but also the fertilizers that are needed to grow crops around the world.

As Grid has reported, Russia and Ukraine are key links in the global food supply chain, a central source of sustenance for hundreds of millions of people — some far from the war zone — who depend on the warring countries for basic staples. The war interrupted those supplies — and drove up food prices internationally.

And although a U.N.-brokered deal to resume Ukrainian deliveries of grain from last year’s harvest has provided partial relief, another fallout persists: Russia is also the world’s largest exporter of fertilizers and fertilizer ingredients, and global supplies are estimated by some to be down by around one-quarter as a result of the war. (The precise number is hard to pin down, say analysts, because Russia isn’t transparent with its trade data.) Before the war, Russia accounted for some 23 percent of global ammonia exports, and 14 and 21 percent of urea and potash, respectively. These are the building blocks, if you will, of the global fertilizer supply.

The disruption of these supplies is a major factor behind a continuing spike in international fertilizer prices. Prices were already rising last year, thanks to supply chain and production shortfalls caused by the covid-19 pandemic, which resulted in an 80 percent price hike in 2021. Russia’s invasion drove an additional rise of around 30 percent in the various fertilizer raw materials earlier this year, according to the World Bank.

Another war-related problem has added to the pressure: a drop-off in Russian natural gas supplies to Europe has led to a steep reduction in European fertilizer stocks. Natural gas isn’t just a source of power; it’s a key base ingredient in fertilizer production. As of late August, around two-thirds of the continent’s production of fertilizer had been halted.

There are only a handful of major global suppliers of fertilizer, but demand is truly global. A shortage of fertilizer translates into big problems for farmers in many corners of the world. It means that countries are competing for limited fertilizer stocks, ahead of the next crop planting season. The chief worry among farmers, experts and policymakers alike: Continued pressures in the fertilizer market could drive down the amount of farmland that can be cultivated in coming months. The impact would be felt during the next harvests, reducing the amount of food there is to go around.

Across West Africa, farmers are already facing these problems, scaling back on cultivation — something Guterres highlighted in his General Assembly address. “We already have reports of farmers in West Africa and beyond,” he said, “cultivating fewer crops because of the price or lack of availability of fertilizers.”

For the world, which was already facing a food crisis before the Russian invasion of Ukraine, that could prolong and possibly worsen a central challenge: making sure that people in lower- and middle-income countries, millions of whom have been struggling to secure access to the most basic staples, have enough to eat.

“The longer this (fertilizer) crisis goes on, the more we’re going to see an actual problem of supply,” Caitlin Welsh, the director of the global food security program at the Center for Strategic and International Studies, told Grid.

How to solve the “fertilizer market crunch”

In his U.N. General Assembly speech, Guterres told world leaders, “It is essential to continue removing all remaining obstacles to the export of Russian fertilizers and their ingredients.”

Technically, the trade in Russian fertilizers is not sanctioned; both the United States and the European Union have said their restrictions on the Russian economy have carve-outs to allow the flow of this essential commodity. Guterres highlighted as much this week: “These products are not subject to sanctions,” he told the General Assembly.

But Russia says sanctions on the Russian banking system and other parts of the Russian economy have meant that foreign buyers face a series of financial and logistical hurdles in trading with Moscow — a claim that is questioned by many experts who blame Russia for using fertilizers as a weapon in the war, much as it stands accused of doing with natural gas and food staples. By holding back supplies, Russia can pressure Ukraine’s allies.

U.S. officials have dismissed Russian claims about the fertilizer trade as “misinformation,” as has the E.U., which stressed in a recent statement that “anyone can operate, buy, transport, ensure food and fertilizers coming out of Russia.” Moreover, E.U. officials said European countries can — under provisions included in the sanctions regime — allow Russian-flagged ships and Russian trucks into the E.U., if their purpose is to transport agricultural products such as food and fertilizer.

But the global market for fertilizers has been affected, no matter what the rules say — and thus the prices have risen. One factor behind this, experts told Grid, is that some companies are “self-sanctioning,” choosing not to buy any Russian goods even if such purchases are allowed — a phenomenon highlighted recently by analysts at the financial firm Standard & Poor’s. Many international customers were “not buying from Russian suppliers due to uncertainties over payments (to suppliers),” as well as concerns as to whether Russian manufacturers would be able to make good on their deliveries. Customers also expressed concerns about the “legal or reputation risks associated with doing business with Russian firms.” It’s a big worry for many: Even if a Russian firm is operational today, and able to accept orders, will it be able to do so tomorrow? As the war persists, the future direction of the sanctions regime and its impact on Russian businesses remain unclear.

The war has also led to the shutdown of some supplies of ammonia — critical to making a nitrogen-based variety of fertilizer — via a key pipeline owned by the Russian fertilizer producer Uralchem. The pipeline can pump up to 2.5 million tons of ammonia annually from Russia to a Black Sea port in Ukraine, according to Reuters data. But it has been shut since the outbreak of war.

Restarting the ammonia flow and fertilizer production, generally, is a priority for the U.N. To do so, both Russia and Ukraine need to come to an agreement, similar in principal to the arrangement that unblocked food supplies at those Black Sea ports; the ammonia pipeline runs through what is still a war zone. Unsurprisingly, perhaps, getting the warring parties to agree has proved complicated: earlier this month, for example, Ukrainian President Volodymyr Zelenskyy told the Reuters news agency that he would only back the idea of reopening the pipeline, which runs through Ukrainian territory, if Russia released prisoners of war. The idea was immediately rejected by the Kremlin’s spokesman, who was quoted by Russian state media as saying: “Are people and ammonia the same thing?”

The U.N. is now trying to resolve the impasse by involving a third party. Under one recent proposal to help ease the crisis, the U.N. has suggested the pipeline reopen and the ammonia be transferred at the Russia-Ukraine border to the U.S. commodities trading firm Trammo. The company would then help take the supplies forward to international customers, according to reports.

Who else has fertilizer?

While Russia is the world’s top exporter of fertilizers, a handful of other countries — China, the U.S., India and Canada — are major producers. Together these five countries count for more than 60 percent of global fertilizer supply.

But three of those countries — China, India and the U.S. — are net importers, meaning they have no supplies to spare.

Meanwhile, quickly adding to the global supply is difficult. Ammonia production, as noted, requires natural gas, which is also in short supply. Two other key fertilizer components, phosphorus and potassium, are mined minerals; China produces more than one-third of the world’s phosphorus, followed by the United States, India, Morocco and Russia — and additional mining cannot happen with the snap of a finger. The same is true of potassium — two-thirds of which is supplied by just three countries: Canada, Russia and Belarus.

One alternative, when it comes to potash fertilizer, is Belarus; the problem there is that the fertilizer industry there was already under international sanctions before the outbreak of war; the restrictions, imposed in 2021, were put in place to pressure the authoritarian regime of Belarusian President Alexander Lukashenko, a key ally of Russian President Vladimir Putin. They have been further tightened in recent months.

Canada is another major producer and has seen sales soar as the Russia trade has been disrupted. But bringing new production online to fill gaps caused by the war could take years, analysts told Grid — time that the world simply does not have. In Brazil, for example, a Canadian-owned company has proposed mining a potash deposit in the Amazon, saying production there could potentially meet half the country’s needs — but even if the project is approved, bringing that capacity online would take at minimum around three years.

The basic point: There are other suppliers of fertilizer — but they won’t be able to act quickly to bring more fertilizer to the global market.

And so the U.N. and others will continue to press the Russians to reopen the shipments of fertilizer and negotiate the reopening of that ammonia pipeline. All the while, the imperative is to solve the problem, and fast. In West Africa alone, the World Food Programme estimates that more than one-quarter of cereal production could be lost — all because of a shortage of fertilizer. Farmers from Brazil to India stand to be affected.

As Guterres warned: “Without action now, the global fertilizer shortage will quickly morph into a global food shortage.”

Thanks to Alicia Benjamin for copy editing this article.

Source link

What do you think?

Leave a Reply

Your email address will not be published.

GIPHY App Key not set. Please check settings

Tylenol shortage: How far parents are going for medicine

Radio Ergo audience feedback report, Issued: 23 Sep 2022 – Somalia