When Russian President Vladimir Putin sent his troops into Ukraine on Feb. 24, the economic consequences radiated across the world like the ripples of a stone tossed into a pond. The invasion exacerbated a supply-and-demand crisis caused by coronavirus lockdowns, strained trade relations with China, and unusually high costs of natural gas, which had already inflated fertilizer prices, creating a “perfect storm” of adverse conditions. Even as of press time, China is seeing its worst coronavirus flare-up since early 2020, and in keeping with its “zero-
COVID-19” policy, has all but shut down many industries and the free travel of its citizens, especially in Beijing and Shanghai.
Aside from the obvious and catastrophic human costs incurred by the Ukrainian people by Putin’s unprovoked invasion, the war’s financial impacts across the entire globe, combined with the pre-existing challenges have been substantial.
The Ukrainian conflict is pinching fertilizer supply lines, restricting commodity exports, creating food shortages in many developing countries, and sending global soil-nutrient costs soaring to record highs.
The first and most obvious reason is that Russia is the world’s largest exporter of fertilizer. In 2020, Russia’s soil nutrient exports totaled around $7 billion — twice that of the U.S. The country is responsible for 15% of the world’s nitrogen-based fertilizer and 17% of global potash. The many sanctions imposed by the global community have either severely restricted Russian exports of soil nutrients or shut them down altogether.
To make matters worse, Russia’s ally in the Ukraine invasion, Belarus, was the world’s third-largest producer of potash behind Russia and Canada — until they aligned with Putin. Now, their potash exports have been drastically reduced.
According to Andrew Muhammad, a professor in the Department of Agricultural and Resource Economics at the University of Tennessee Institute of Agriculture, the Ukrainian crisis is impacting American farmers directly because of the global instability it is creating.
“Fertilizer markets were already rising, partly because of the elevated price of natural gas, which is a major component in the production of certain types of soil nutrients,” says Muhammad. “But then, many countries imposed trade actions in response to higher prices, and Russia decided to restrict exports. China, another major exporter, has also restricted exports due to a combination of COVID-19 lockdowns and their resulting problems and concerns about fertilizer being available for Chinese farmers.”
Although America’s reliance on phosphate and ammonia is relatively small, he says, some 80-90% of potash is imported, along with around 50% of urea.
“Now, you have something that's particularly impactful for the US — our reliance on Russia for potash fertilizer,” Muhammad explains. “At least two-thirds of our potash comes from Canada, but a little less than a third is from Russia and Belarus combined, and obviously, we now have trade sanctions against both countries. It’s clear that fertilizer supplies are being impacted because of this conflict.”
As of the first week of March, fertilizer prices had more than doubled over the previous 18 months. Weakley County row crop producer Keith Fowler says the price increases are requiring farmers to be “more frugal” in their planning and careful in their execution.
“It's costing a lot more per acre to put a crop out,” says Fowler, who also represents Zone 1 on the Tennessee Farmers Cooperative Board of Directors. “Some folks are opting for beans over corn this season, which is understandable since corn requires less nitrogen. In our case, we’re sticking with our normal rotation. We’re careful not to put out anything extra while using some nitrogen stabilizers and whatnot to keep what we have. It’s not the time to try building soil fertility; we just need to maintain it.”
He also advises his fellow growers not to opt-out of fertilizing entirely.
“Cutting back is not a good option,” says Fowler, who grows around 5,800 acres of corn, wheat, and soybeans. “That will hurt you in the long run. Instead, I think we have to be smart and use precision ag and variable fertilizing technologies to put the nutrients exactly where we need them. That will pay off more this year than ever.”
Tennessee Farmers Cooperative joint venture company GreenPoint Ag CEO Jeff Blair points out that American agriculture should focus on long-term solutions and must prepare for a certain amount of sacrifice.
“Without nitrogen (urea/ammonia), phosphate and potassium (potash), you don’t grow enough food, fuel, or fiber to feed, move, or clothe the world,” says Blair. “There are ways to replace a lot of these [imported soil nutrients], but none of them are quick or cheap. Short term ‘suffering’ is a critical part of any journey towards a better tomorrow. Everything else is just a fantasy.”
To try to help mitigate the supply issues — and hopefully stabilize prices — the U.S. Department of Agriculture (USDA) announced in March an effort to bolster domestic fertilizer production with a new grant program. According to the agency’s website, the grant will make available $250 million this summer to “support independent, innovative and sustainable American fertilizer production to supply American farmers.” The grant program will provide ‘gap’ financing to bring new, independent domestic production capacity on-line.
The website adds that “Additionally, to address growing competition concerns in the agricultural supply chain, USDA will launch a public inquiry seeking information regarding seeds and agricultural inputs, fertilizer, and retail markets.”
Fowler says he hopes initiatives like this will address some of the underlying issues behind agricultural supply problems.
“Sometimes it takes a crisis like a war or a pandemic to become more innovative about how and where we produce our resources, like energy and fertilizer,” says Fowler. “Let’s hope we see some long-term benefits.”