Disruption to gas supply and a further increase in the price of fertiliser are of “big concern” amid the Russia-Ukraine conflict, managing director at Grassland Agro, Liam Woulfe has said.
Speaking to Agriland, Woulfe said he cannot forecast prices, however considering the increase in the price of gas “it won’t be downwards anyway, it will be upwards”.
The worry at the moment is whether the invasion of Ukraine will lead to further supply disruption which is key for the next two months in terms of fertiliser purchases.
The managing director at Grassland Agro described the situation in terms of fertiliser as a very “challenging” and “tricky” period.
“The pricing issues in the near term will be very firm because the products are very expensive coming in,” he explained.
The Irish Farmers’ Association (IFA) said that the conflict between Russia and Ukraine could seriously affect production costs, energy and fertiliser prices in particular, due to the supply and demand of gas.
Imposed sanctions against Russia including the suspension of Nord Stream 2, a new gas pipeline into the EU, will have “inevitable” consequences for Europe too, the IFA said.
EU figures for 2019 indicate that the EU imports over 40% of natural gas from Russia. Further energy sources dependent on the country include solid fuel (46.7%) and crude oil (26.9%).
Markets have reacted immediately to the conflict with the price of natural gas, after dipping in January, increasing by 34% yesterday and 57% in the last week alone.
A disruption in gas supply, the IFA has said, would cause further price jumps not only felt in electricity prices, but also food and consumer goods.
Imports and exports in Russia
Of most concern from a Russian perspective, the IFA said, is the potential impact on availability and price of key commodities. In 2021, Ireland imported fertilisers from Russia valued at around €134 million.
Russia is the second-largest producer of gas worldwide and the biggest supplier to the EU, a third of which flows through pipelines that cross Ukraine.
Almost half (46.8%) of EU gas was imported from Russia in 2021, according to the IFA which further stated that “a full-blown conflict could disrupt the massive volumes of natural gas that Russia sends to Europe”.
Russia has considerable phosphate rock, potash, oil and gas reserves and is a primary producer of all three of the main commercial fertiliser nutrients – nitrogen (N), phosphorus (P) and potassium (K).
According to the farm organisation, estimates indicate that the country accounts for around 13% of global trade for key fertiliser intermediaries (ammonia, phosphate rock and sulphur) and almost 16% of global trade in the key finished fertilisers.
The country further accounts for the following:
- 24% of global ammonia exports in 2020;
- Approximately 40% of global ammonium nitrate trade in 2020;
- Approx. 13% of global urea trade;
- Approx. 17% of total global trade in finished phosphate fertilisers (incl. NPK);
- Approx. 20% of world potash trade with Belarus accounting for another 20% of world trade;
- Europe accounts for 9% of Russian nitrates exports;
- Europe accounts for around 30% of Russian phosphate fertiliser exports.
Russia is a key global provider of phosphates, the IFA said, a major exporter of finished phosphate fertiliser, and also the largest global producer and supplier of high-grade igneous phosphate rock.
“Any interruption would have an immediate and significant impact on European fertiliser production,” the association said.
Ukraine is not a significant global supplier of fertiliser since it has no primary phosphate or potash resources, however it is an important nitrogen producer almost entirely based on imported natural gas, the farm association claims.
Managing director with Grassland Agro, Liam Woulfe concluded that they are on the case “at every minute, night and day at the moment”.