The global fertilizer market has been in crisis since 2022 amid increasing prices and a significant supply shortfall that threatens to exacerbate food insecurity across the world. This crisis was worsened by the 2022 invasion of Ukraine by Russia as the Kremlin and Belarus are among the top producers of the key nutrients used in most conventional fertilizers.
Russia is responsible for 11% and 14% of global phosphate and urea trade respectively while both countries collectively produce 41% of the world’s potash. Additionally, Ukraine and Russia collectively export 28% of nitrogen, potassium and phosphorous fertilizers.
Fertilizer prices were already reaching historic highs prior to the invasion, but they surged even higher following the outbreak of war in Ukraine. After peaking in the wake of the Russian invasion at more than three times prepandemic levels, fertilizer prices went down by two-thirds and are currently resting at 20% over prepandemic levels.
Countries dependent on Russia and Belarus scrambled to find alternative suppliers in early 2022 as the Kremlin faced Western sanctions, but the global economy has adjusted quite well by turning to new sources and investing in new production centers. In addition, the cost of raw materials such as ammonia, urea and gas has also gone down in recent months. Russia and Belarus were also able to keep exporting fertilizers to foreign nations, although with a lot more difficulty due to the sanctions and at lower-than-usual volumes.
While this confluence of factors arrested the surge in fertilizer prices and brought them closer to prepandemic levels, prices could reduce even further if sanctions against Belarus and Russia are lifted. Since 2022, both countries have been pushing to lift sanctions that impact their ability to export fertilizers such as banning Russia from SWIFT, the global payment system. Many experts also believe that lifting these sanctions may be necessary in the fight against growing food insecurity, especially in low-income nations grappling with inflation, higher cost of living, and devaluing currencies.
In March 2023, U.N. Secretary-General António Guterres asked EU leaders in Brussels to lift sanctions that prevent fertilizers from Belarus and Russia from entering the market to help stop world hunger. People in most countries are still dealing with high food prices despite the fall in fertilizer prices as high farming costs, supply chain challenges and weather disruptions have impacted the global food supply.
The cost of common household foods such as wheat, corn, soybeans and rice surged to historic highs following the invasion of Ukraine and are still at extremely high levels in most countries.
Fertilizer makers such as Compass Minerals International Inc. (NYSE: CMP) are likely engaged in searching for innovative ways to avail the needed plant nutrients at more affordable prices in light of the escalating production costs.
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