War Creates a ‘Factor of Chaos’ in Ag Trade

Beyond the human tool of Russia’s invasion of Ukraine, the war creates volatility and uncertainty in agriculture.

Russia and Ukraine rank 56th and 80th, respectively, as destinations for U.S. commodities. The war, however, will destabilize global trade and create “a factor of chaos,” said economist David Anderson, Ph.D., with Texas A&M AgriLife Extension.

On Friday, the Russian trade ministry called for a broad suspension of fertilizer exports, state news agency TASS reported Friday. That will drive up prices for an agricultural input that already experienced a doubling of some prices in 2021.

Brazil, an agriculture superpower in the production of coffee, soybeans, and sugar, will be hard hit. It imports 85 percent of its fertilizer, a fifth of which comes from Russia.

If Brazilian farmers have to pay significantly more for fertilizer or are unable to produce as many crops, the cost of its agricultural products is likely to climb, driving up world food prices.

Brazilian Agriculture Minister Tereza Cristina Dias will travel to Canada this month to secure more supplies. Canada is the world’s largest producer of potash fertilizers, followed by Russia and Belarus.

Higher fertilizer costs also prevent Brazil’s farmers from increasing production of grains to make up for shortfalls from Ukraine and Russia, which together account for 30 percent of global wheat exports.

China has announced it is open to grain shipments from Russia, providing an outlet for Russian grain sales and helping China fulfill its demand. Mark Welch, Ph.D., also an economist with Texas A&M, said the timing of the war may minimize the immediate impact on grains.

“We are pretty deep into (the Ukrainian/Russian) growing season, which ends May 31, so I do not know how much more wheat is left to be shipped in the next few months,” said Mark Welch, Ph.D. “In that respect, the timing of this invasion may limit short-term impacts. Certainly, damage to port infrastructure or shipping restrictions in the Black Sea will slow trade and make it much more expensive.”

Anderson also said that Russia is less dependent on other nations for agricultural imports than it was in recent history. Russia once relied on imports for proteins like pork, poultry and beef but has increased domestic production. In 2010, Russia imported around one-third of its pork, but increased its production by 26 percent and is now a net exporter of pork.

Sources: Wall Street Journal, Texas A&M