The Russia-Ukraine War is Likely to Lead to Higher Fertilizer Prices Worldwide

The Russia-Ukraine war is likely to have a significant impact on the global economy and agriculture, as prices for fertilizer products have been rising worldwide, with Russia being the largest producer and supplier of fertilizer.

According to US Secretary of Agriculture Tom Vilsack, the biggest challenge facing farmers is rising fertilizer prices, which in turn is driving up crop prices.

In one year, the prices of fertilizer products in the US have almost quadrupled, and, likely, the imposition of economic sanctions on Russia will further exacerbate the global shortage of fertilizer products. It should also be noted the increase in energy costs – in particular, gas – used in the process of fertilizer production and increase in transportation costs.

In 2007-2008, during the food crisis, Russia demonstrated its influence on fertilizer production, in particular, Russia and Belarus significantly reduced potassium production, which led to a nearly 400% increase in the share of fertilizer products in a few months.

Russia is also an important player in the nitrogen fertilizer market. Although its share of global exports is less than 17%, Russia produces almost 66 percent of one of the main ingredients of the fertilizer, ammonium nitrate. It should be noted that in 2021, $ 8.7 million worth of fertilizer was imported from Russia to Georgia and this product is in the top platoon of imported goods.

The cost of fertilizer accounts for 30-40% of the operating costs of a large portion of American farmers. Although the US market is not directly dependent on Russian imports, it is expected that supply constraint in the global market and rising prices will affect the US agricultural sector.

In the short term, experts predict rising fertilizer prices and the cost of producing agricultural products around the world, which will be due in part to the Russia-Ukraine conflict.

In the long run, markets are expected to diversify and countries to reduce their dependence on Russian imports. It is noteworthy that Russia is not the only player in the market of fertilizer products and it is competing with other countries, for example, China, Canada, the USA, and Morocco.