Russia and Ukraine are two of the world's largest producers of agricultural commodities, with exportable supplies in the global food and fertiliser markets concentrated in a few countries.
Fertiliser 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 British commodity consultancy CRU, prices for raw materials that comprise the fertiliser market — ammonia, nitrogen, nitrates, phosphates, potash, and sulphates — have risen 30% since the beginning of the year and now exceed those seen during the 2008 food and energy crisis.
Russia, which accounts for roughly 14% of global fertiliser exports, has temporarily halted outgoing trade, which is expected to have a significant impact on global food markets.
The Russia Connection
Russia was the world's top exporter of nitrogen fertilisers in 2021 and the world's second-largest supplier of both potassic and phosphorous fertilisers.
"Russia's export ban this month on key crop nutrients containing nitrogen, potash, and phosphates has sent prices soaring, while farmers were already facing high fertiliser costs due to sanctions on Belarus, a leading potash producer, and Chinese export restrictions."
Sanctions against Russia's ally Belarus have significant implications for the potash market, with Russia and Belarus accounting for 40% of annual traded volumes.
Farmers around the world are feeling the sting of sanctions, as the Ukraine war has sent fertiliser prices soaring to new all-time highs, raising fears of a global food shortage.
Many European and Central Asian countries rely on Russia for more than half of their fertiliser supply. The German agricultural sector receives 30% of its supply from Russia, which local organisations warn cannot be replaced in the short or medium-term by domestic producers.
Russia’s fertiliser exports to India jumped by a whopping 469% to $106 million from over a year ago, according to the international trade data platform Observatory of Economic Complexity.
"Wheat futures are up 29 percent since February 25, with corn up 15 percent, soybeans up 6 percent, and other commodity grains trailing behind."
"Wheat prices are rising as some of the world's largest importers seek supplies from alternative shippers, which has suffocated Black Sea exports."
How India fills the Fertiliser Supply Gap
India is in talks with Canada and Israel to import fertilisers.
India is a leading importer of fertilisers for its huge agriculture sector, which employs about 60% of the country’s workforce and accounts for 15% of the $2.7 trillion economy.
“This time we have made advance preparations for kharif (summer sown crop) season. We need about 30 million tonnes of fertilisers and arrangements are in place,” fertiliser minister Mansukh Mandaviya told Reuters, without elaborating.
He said India will have a comfortable opening stock, about a quarter of the overall number of fertilisers needed for the summer season.
Indian farmers usually start planting crops including rice, cotton and soybean with the arrival of monsoon rains in June.
To fertilise the crops, India depends on imports for its entire annual consumption of 4 million to 5 million tonnes of potash and ships in a third of this from Belarus and Russia.
Indian Potash Ltd (IPL) has increased imports from Canada, Israel and Jordan.
It will buy 1.2 million tonnes of Potash from Canada, 600,000 tonnes from Israel and 300,000 from Jordan in 2022 to partly replace supply from Russia and Belarus, numerous sources said.
Traditionally India has used prices struck in deals with Belarus and Russia as the benchmark for supplies from other countries. For 2022, Canada has emerged as a price setter, sources told Reuters.
IPL is buying potash from companies in Canada and Israel at $590 per tonne on a delivered basis with six months of credit in 2022.