Concern higher fertilizer prices may cause surge in crop production costs

By Jane Byrne contact

- Last updated on GMT

© GettyImages/JackF
© GettyImages/JackF

Related tags: fertilizers, Grain, oilseeds, potash, Belarus

War and sanctions are likely to have a shocking impact on global grain and oilseed sectors.

“We could see wheat prices double, vegetable oil markets lift by 20%, and corn and barley prices lift by 30% in 2022 and into mid-2023 before we might see some rebalancing after the northern hemisphere harvest,” ​reckons Rabobank.

Higher global freight costs would also add additional upward cost pressures to the grain and oilseeds supply chain, said the agri-commodity market specialists. 

And, in a recent update​, those analysts also said they expect to see fertilizer prices lift, even by as high as 40%, with upward pressure on potash prices, in particular, as Belarus is a key supplier of that component.

AHDB, in its market review​ on Friday, anticipates similar market dynamics, commenting that the Russian-Ukrainian war has not only caused large volatility in grain markets, but that the conflict is also supporting energy markets significantly.

Rising natural gas prices is increasing pressure on fertilizer prices, said the AHDB team, noting that natural gas is a key ingredient in the process used to make nitrogen-based fertilizers.

Indeed, in response to high gas prices, Yara announced last Wednesday [March 9] that its European ammonia and urea production was anticipated to operate at around 45% capacity.

“Higher fertilizer prices mean costs of production globally will increase, which could alter which crops are grown. Also, the quality of grain (such as milling wheat) may well be reduced if fertilizer input is reduced. Finally, yields could be lower if farmers choose or are forced to reduce fertilizer applications, potentially impacting global production,” ​said the AHDB team.

G7 ag ministers condemn attacks on ag infrastructure

The G7 agriculture ministers met on Friday. Afterwards, they published a joint statement​ outlining their “deep concern”​ about the impacts on food security and the rising number of people suffering from hunger and all forms of malnutrition, caused by Russia’s invasion of Ukraine.

The conflict adds to the “already severe situation”​ in relation to food security “caused by COVID-19, climate change and biodiversity loss.”

The ministers also raised the alarm over the “sharp rise”​ of already high prices for agricultural commodities and inputs, such as fertilizer, and the attacks on agricultural-linked operations. 

“We deeply condemn Russia’s attack on Ukraine. We are greatly alarmed by the targeting of critical agricultural infrastructure, including transportation and storage, which is having significant regional impacts.”

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