Shortly after Russia invaded Ukraine, its fertilizer export revenue surged despite a decrease in sales volumes. During the first 10 months of last year, fertilizer exports from Russia soared by 70% to reach $16.7 billion. This is quite an increase, especially when compared to revenue generated in the same period in 2021.
Data from an analysis done by the UN Food and Agriculture Organization shows that Russia’s overseas sales dropped by 10% from the same period in 2021. This is mild in comparison to analysts’ predictions that shipments would decline significantly because of the war.
While Western sanctions have been imposed on oil exports from Russia, food and fertilizer exports are exempt from the same to support food security, particularly for poorer nations. This has seen Russia increase its exports to countries such as Vietnam, Turkey and India.
Last month, the European Union released a statement clarifying the exemption from sanctions for fertilizer and agriculture exports from Russia, following claims among member states that some shipments were delayed over worries that individuals or firms would be sanctioned. The Union also introduced new exemptions that allowed member states to release funds of sanctioned parties involved in the Russian agricultural and fertilizer sectors.
The price of fertilizer globally had begun increasing even before Ukraine’s invasion and after Russia cut back its natural gas supply. Natural gas is the primary feedstock for nitrogen fertilizers, which are necessary for food production. Following the invasion, a surge in gas prices was observed, leading to plant closures in Europe. This, in turn, led to a jump in the price of nitrogen fertilizer.
It is expected that this run will end soon, as a decrease in gas prices has led to a drop in the price of fertilizer, with producers following suit by increasing their production. Josef Schmidhuber of FAO stated that this meant that imports by nations under the EU would reduce significantly He added that producers ramping up production would increase nitrogen supplies globally, noting that this would lead to a decline in the price of potash and phosphate.
Grain shipments have also increased to levels recorded prior to Russia’s invasion of Ukraine, with the latest data showing that during the last three months of last year, the volume of grains such as corn and wheat had risen by more than 20%.
Ammonia is expected to take a longer time to recover, however, with FAO data showing that Russian exports of this important feedstock dropped by roughly 75% by volume in the first nine months of last year.
For now, fertilizer makers such as Compass Minerals International Inc. (NYSE: CMP) will continue to enjoy the current bull run that their products are enjoying around the world.
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