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Will the Ukraine Conflict Spike Fertilizer Prices?

March 6, 2022 by Leave a Comment

What effects will the conflict in Ukraine have on fertilizer prices? Russia’s decision to invade Ukraine could have dramatic impacts on the global potash supply. This is compounded by China’s decision to halt fertilizer exports last fall. Potassium prices are going up, but by how much?

Plants provide food, fiber, housing and a host of other benefits, and fertilizer plays a key role in this process. As the world population is expected to exceed 9 billion by 2050, fertilizer will be needed more than ever to boost crop production to keep people fed and healthy.

All growing plants need 17 essential elements to grow to their full genetic potential. Of these 17, 14 are absorbed by plants through the soil, while the remaining three come from air and water.

Nitrogen, phosphorus, and potassium, or NPK, are the “Big 3” primary nutrients in commercial fertilizers. Each of these fundamental nutrients plays a key role in plant nutrition: Nitrogen (N), Phosphorus (P), and Potassium (K). Potash is the fertilizer industry slang for K. It helps plants with resiliency in the face of adverse weather and disease pressures.

There are three main producers of potash: Canada, Russia, and Belarus. Together these 3 account for 67% of global production. Russia and Belarus account for ~35% of global production. Belarus already declared force-majeure on exports.

Events in Ukraine are evolving rapidly. It’s impossible to know if potash from Russia and Belarus will be impacted yet. The current Russian move to open warfare and the resulting civilian casualties could ultimately trigger sanctions that disrupt commodity exports.

Since Canada is the single largest supplier of potash and produces ~32% of global supply, the US is mostly insulated from the possibility of shortages. But this doesn’t mean the US won’t feel the pain of higher prices if Russian and Belarusian potash is taken off the market.

The pain of higher potash prices is compounded by the scarcity of other sources of K. In Oct, China halted fertilizer exports. This created a shortage since China accounts for around 30% of the global market for urea, phosphates, and sulfates. While North America is largely self-sufficient when it comes to NPKs, it’s reliant upon imports for one source of K (and N): potassium nitrate. When China enacted its export ban, close to 150 thousand metric tons of potassium nitrate vanished overnight.

There’s actually a shortage of certain grades of potassium nitrate here in the US. Fertilizer blenders in the southeast are experiencing shortages and are on allocation.

The only silver lining is that Chile. The same mining process that produces lithium also produces potassium nitrate. Chile should fill the 150k ton shortage by end of 2023.

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