Russia’s invasion of Ukraine has been a factor in the 30%
surge in international food prices and 10% rise in the US food prices over the
last year, as supply chains continue to sputter in the wake of the coronavirus
pandemic.
The price pressures exerted on agricultural markets by
Ukrainian exports like wheat and sunflower oil have been so far mostly caused
by issues with their transportation, with cargo ships stuck in blockaded ports
that Russian authorities say need to be cleared of mines.
A shift in Russian fertilizer policy could go a step
further, leading to problems with food production in addition to distribution.
“If the fertilizers don’t flow, then the world will produce
less,” United Nations Food and Agriculture Organization (FAO) Chief Economist
Máximo Torero said in an interview. “That’s why we’re saying that next year we
could have a problem of food availability, and also of food access like what we
have today.” Lower use of fertilizer results in lower crop yields regardless of
supply chain issues, Torero said.
“That’s what will create the problem of food availability,
in addition to food access. That’s what worries us, that’s for us the most
dramatic scenario. And that’s what we need to avoid,” he added.
Even without an export restriction, international companies
have been hesitant to purchase fertilizers from heavily sanctioned Russia,
which is the world’s top exporter of soil additives containing nitrogen, as
well as those with phosphorus and potassium — all byproducts of the vast
Russian energy industry.
In 2019, Russia exported 5.5 billion kilograms of these
fertilizers, more than double the amount of the second biggest exporter, the
European Union, and nearly four times as much as third biggest exporter,
Belgium, according to figures from the World Bank.
This commercial hesitancy caused the US to offer “comfort
letters” last week to companies considering purchasing Russian grain and
fertilizer. These notices assure buyers that they won’t face penalties for
using unsanctioned products.
“Fertilizer has, as you know, has become a huge problem, and
Russia is a large fertilizer exporter. They just need to open up their own
markets and end this war, end the blockade that they are responsible for and
allow food to flow,” US Ambassador to the UN Linda Thomas-Greenfield told
the BBC last month.
At a meeting of the UN Security Council in May on food
security, Secretary of State Anthony Blinken stressed that “the sanctions
imposed by the United States and many other countries deliberately include
carveouts for food, for fertilizer, and seeds from Russia, and we’re working
with countries every day to ensure that they understand that sanctions do not
prevent the flow of these items.”
Countries most reliant on nitrogen-based fertilizer exports
from Russia and Russian-allied Belarus include Singapore, Mongolia and Panama,
with the US receiving more than 20% of its imported fertilizers from the two
countries, according to German market research firm Statista.
Russia, for its part, sees a contradiction in the Western
position of levying aggressive sanctions against the country while at the same
time demanding commercial access to its agricultural commodities and energy
byproducts.
“The EU openly declared an all-out economic and trade war
against our country — in full oblivion to Russia’s standing as a key global
supplier of basic agricultural products (wheat, barley, sunflowers, mineral
fertilizers and fodder crops), including to low-income countries, that are
subject to risks of food shortages,” the Russian Foreign Ministry said in a
statement. “Instead of making groundless allegations European leaders should
rather turn their attention to redressing the systemic miscalculations in their
own macroeconomic, monetary, trade, energy and agro-industrial policies.”
“We are deeply concerned about a possible food crisis and
are well aware of the importance of supplies of socially important
commodities,” the foreign ministry added. “Russia expects to have a good wheat
harvest this year, which will allow our country to offer 25 million tons of
grain for export from August 01, 2022. Our capacity for exporting fertilizers
from June to December 2022 will amount to at least 22 million tons (20% of
global consumption over this period).”
US lawmakers are less than keen to rely on Russian
reassurances.
Rep. Josh Harder introduced legislation last
month that would extend a government relief program for farmers dealing with
rising input costs.
The Department of Agriculture funding arrangement, known as
the environmental quality incentives program, “provides agricultural producers
and non-industrial forest managers with financial resources and one-on-one help
to plan and implement improvements” that can lead to “healthier soil and better
wildlife habitat, all while improving agricultural operations.”
Harder’s bill would institute a temporary cost-sharing
agreement of up to 100 percent between farmers who take up the program and the
Agriculture Department.
Farmers in the program who work “to develop and implement a
nutrient management plan for their operation will be getting access to these
payments,” Harder told the House Agriculture Committee in May.
“This is more
critical than ever as we’ve seen the cost of everything go up around us, and we
know how much it’s hurt our producers, especially when they’re trying to buy
input like fertilizer,” he said. “So as fertilizer prices surge, folks need
alternatives, and this is going to help address this. It’s also going to
further conservation practices. It’s going to reduce fertilizer use, lower
costs.”
While Russia has denied that its invasion has contributed to
a food crisis, the FAO blames the conflict in no uncertain terms.
“It is clear that the war has resulted in a massive, and
deteriorating, food security challenge,” the agency said in a March assessment.
“It has already significantly disrupted livelihoods during the agricultural
growing season, through physical access constraints and damage to homes,
productive assets, agricultural land, roads and other civilian infrastructure.”
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