Revenue from Russian fertilizer exports will increase by 70% in 2022 as prices jump

Russia’s revenue from fertilizer exports rose last year despite lower sales volumes, as crop nutrient prices rose sharply after its invasion of Ukraine.

In the first ten months of 2022, Russian fertilizer exports jumped 70 percent to $16.7 billion compared to the same period in 2021, according to United Nations data.

Import statistics from Moscow’s trading partners show that, in terms of volume, the foreign sales of the world’s largest fertilizer exporter fell only 10 percent from the same period a year earlier, according to an analysis by the United Nations Food and Agriculture Organization.

This comes despite analysts’ predictions of a collapse in shipments when the war broke out in February.

Food and fertilizer exports from Russia are exempt from Western sanctions in order to support food security, especially for poor countries. Moscow is increasing its exports to countries such as India, Turkey and Vietnam.

Obviously, countries like India have been the biggest beneficiaries [in terms of fertiliser imports]said Josef Schmidhuber of the Food and Agriculture Organization.

Russian and EU officials were concerned that some buyers and their banks and insurance companies were punishing themselves and avoiding buying products from Russia.

The European Union last month clarified exemptions from sanctions on Russian agricultural and fertilizer exports after allegations among EU member states that shipments were sometimes disrupted due to fears of possible involvement of sanctioned Russian companies or individuals.

The European Union introduced new waivers allowing EU member states to unfreeze funds of sanctioned individuals who were involved in Russia’s fertilizer and agricultural sectors.

Global fertilizer prices began to rise even before the war as Russia cut back on supplies of natural gas, the main feedstock for nitrogen fertilizer. Prices of potash, another important fertilizer, jumped after Western governments slapped sanctions on Belarus, a major producer of the crop nutrient, after Minsk cracked down on anti-government protests.

The sharp rise in gas prices after the Russian invasion led to the closure of factories in Europe, which led to a rise in the price of nitrogen fertilizers, which are essential for production and the quality of food production.

However, Russia is unlikely to continue to benefit from higher prices this year. Recent drops in gas prices in Europe thanks to warmer-than-usual weather have pushed down fertilizer prices, with producers in the region ramping up production.

Line chart of the CRU Fertilizer Price Index (January 2006 = 100) showing the decline in international fertilizer prices

“This means that imports from EU countries will drop significantly which is good news for farmers around the world,” Schmidhuber said.

European gas prices are now down to levels not seen since before Russia’s invasion of Ukraine.

“European production is profitable and producers are continuing to produce fertilizer,” said Chris Lawson, head of fertilizers at consultancy CRU. He added, “Global nitrogen supplies are abundant, and we expect a continued decline in phosphate and potash prices.”

Line chart of monthly shipments (million tons) showing recovery in Russian grain shipment volumes

Grain shipments have also returned to pre-war levels. The volume of grain, including wheat and corn, shipped during the last three months of 2022 was up 21 percent from the same period a year earlier, according to data from ship-tracking firm Sea/.

One commodity that has not seen a rebound in exports is ammonia, a feedstock for nitrogen fertilizers, due to the closure of a pipeline running through Ukraine. Russia accounts for about 12 percent of the global ammonia export market, and FAO data shows that Russian exports of the chemical, which is also used in industries such as plastics and textiles, fell 76 percent by volume in the first nine months of the year. 2022 compared to the same period in the previous year.

The UN-brokered Black Sea grain agreement between Moscow and Kiev and renewed in November included a pledge to resume Russian exports of ammonia by reopening the pipeline. Analysts said Russian fertilizer companies and investors, including Russian billionaire Dmitry Mazepin, who has been hit by the sanctions, are calling for shipments to resume even though the recent drop in international nitrogen fertilizer prices is dampening the urgency of the matter.

Additional reporting by Andy Pounds in Brussels

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