“The food crisis will become even more acute in 2023”

Russian producers announced a 15% decline in fertilizer exports. Meanwhile, the world is highly dependent on supplies from our country. Major agro-industrial producers may face a shortage of fertilizers, and wherever there is a shortage, prices will rise. What problems are the consumers of other countries risking to face if our products are not given the green light, MK found out.

“The consequence of Western sanctions was a decrease in Russian exports of mineral fertilizers in 2022, according to expert estimates, by 15%. At the same time, back in the summer, we estimated a 20% reduction in exports. This confirms that Russian producers, starting from June-July, began to recover from sanctions pressure, to find new alternative ways of supply,” said Andrey Guryev, head of the Russian Association of Fertilizer Producers (RAPU).

Of course, a 15% decrease in exports cannot be considered a good result for the industry and for the Russian economy as a whole. It turns out that compared to last year (37.5 million tons of fertilizers worth $12.5 billion), the Russian Federation will supply much less to the world market – 31.9 million tons.

The volume of exports of phosphate and potash fertilizers to Europe fell especially sharply, it decreased by about 30%. Part of the supplies was redirected to other countries, the export of Russian fertilizers to India increased 3 times, to Turkey by 40%, in addition, domestic consumption increased by about 15%.

But, in fairness, it must be said that even in the middle of the year a stronger decline in exports was predicted. Now this problem is partially solved.

Russia traditionally supplies most fertilizers to the markets of Central America (the largest buyer is Brazil), as well as the Asia-Pacific region (China, India, Vietnam) and Africa. By and large, there have been no major changes in logistics this year, says Artem Deev, head of the analytical department at AMarkets.

According to him, after February 2022, Europe introduced a ban on insurance of Russian ships, they were no longer allowed into EU ports, and transfers between banks were also significantly more difficult after domestic structures were disconnected from the SWIFT system. And there is not enough internal capacity for transshipment of mineral fertilizers – not all ports can transship such cargoes.

“It turned out that many cargoes from Russia simply got stuck in the ports of the Baltic States and European countries, which affected export indicators (data were not included in the statistics, since they are not considered delivered to buyers). But the other day, the UN announced the unblocking of cargoes with fertilizers in the ports of Europe, so, most likely, these problems will be gradually solved,” the expert notes.

According to him, the world is dependent on our fertilizers. American farmers are already complaining that they will be forced to reduce production due to rising costs, and European business is talking about the same.

“A food crisis in the world is possible, but not only due to a decrease in exports of fertilizers from Russia. There are climate problems that regularly reduce the yields of various crops, there is a transfer of agricultural products from the poorest countries to the developed ones (which are willing to pay more) … But the fact that the cost of food in the world will grow is certain. And unfortunately, the number of people living below the poverty line will increase,” Deev said.

Russia holds a 20% share of the global market for certain types of fertilizers, says Ivan Samoylenko, managing partner at B&C Agency. “Of course, a reduction in exports from the Russian Federation can lead to an increase in the cost of fertilizers on the world market, and this will lead to an increase in the costs of producers in the agro-industrial complex. And food inflation will rise again, which will most affect Europe, which imports a lot of food,” he believes.

A continuation of the global food crisis next year is possible, but not necessary, says TeleTrade analyst Alexei Fedorov. Still, in 2023, a cyclical downturn in the global economy is expected, which is usually accompanied by deflationary processes.

“Exchange prices for food products in the world will decline, which should mitigate the severity of the problem. But in some developing countries in the Middle East, Africa and other regions, due to falling incomes and the weakening of national currencies, the availability of food can indeed be reduced even more. If lower yields are added to this due to a shortage of fertilizers, if exports from Russia do not recover, then the food crisis will continue in 2023 and possibly become even more acute than in 2022,” the expert believes.