Áine Quinn and Megan Durisin
Fri, February 25, 2022,
(Bloomberg) -- Russia’s invasion of Ukraine is threatening shockwaves through two of the world’s staple grain markets, prompting countries that rely on imports from the region to seek alternative supplies and heightening concerns about food inflation and hunger.
Grain exports from Russia will probably be on hold for at least the next couple of weeks, the local association said on Friday, after turmoil erupted in the Black Sea. Ukrainian ports have been closed since Thursday.
That means the war has temporarily cut off a breadbasket that accounts for more than a quarter of global wheat trade and nearly a fifth of corn. Major importers are already looking at their options to buy from elsewhere, and prices for both grains swung wildly in the past two days.
The disruptions come at a time when global crop prices have already soared to records, while hunger has surged dramatically in the past two years.
“There will be a big impact with respect to wheat prices and prices of bread for ordinary people,” World Trade Organization Director-General Ngozi Okonjo-Iweala said Friday.
Russia and Ukraine supply crops to a long list of countries around the world, including large volumes to buyers in the Middle East and Africa, who will have to look elsewhere and probably pay more for both the grain itself and the cost of shipping. Egypt, the top wheat importer, had scheduled a tender on Thursday but canceled it after only receiving one offer -- of French wheat.
“It is difficult to plan any transactions at the moment,” said Eduard Zernin, the head of the Russian Union of Grain Exporters. “I think it might take a couple of weeks.”
Demand is beginning to shift to alternative export origins including India and the European Union, according to two people familiar with the matter.
In Tunisia, the agriculture ministry said it’s looking to Uruguay, Bulgaria and Romania for supplies of soft wheat to shield itself from possible supply disruptions, while Indonesian flour mills are also hunting for other origins due to the escalating crisis. A Moroccan millers group said it would turn to Argentina, France and Poland, according to chairman Abdelkader El-Alaoui.
However, the outsized role that the Black Sea plays in global grains markets means that alternatives may be limited. Global grain stockpiles are already declining, making it more difficult to offset lost supply.
“It really does put a squeeze on an already tight market and creates a huge amount of uncertainty for the coming weeks if not months,” said James Bolesworth, managing director at U.K.-based CRM AgriCommodities. “For wheat and corn, it pushes demand to other parts of the world where we know stocks are tight.”
In the U.S., the war in Ukraine may have a modest impact on food costs, though grocery inflation is likely to ease this year regardless of the conflict, said Joseph Glauber, former chief economist for the U.S. Department of Agriculture. The crisis may have a more severe impact on food prices in the Middle East and Africa, especially if spring planting is disrupted in Ukraine, he said.
The impact on U.S. consumers will be muted because food commodities account for only a small portion of the price Americans pay for groceries--less than 15 cents of each dollar spent, according to USDA. Volatility in global wheat markets have little impact on the supermarket cost of a loaf of bread or a box of cereal.
Where the U.S. will likely be more affected is in the cost of grains such as corn and soybeans used to feed livestock and poultry. It could exacerbate the pressures meat producers are already feeling, with drought in the U.S. plains accelerating the decline of herds.
For Russian grains, in addition to the challenges of shipping in the Black Sea, some of the country’s biggest wheat exporters have links to state-owned bank VTB Group, which is now under sanctions from the U.S.
Overall, the war is likely to have far-reaching effects, the World Food Programme said.
“The food security impact of the conflict will likely be felt beyond Ukraine’s border, especially on the poorest of the poor,” the Rome-based agency said in a statement.“Interruption to the flow of grain out of the Black Sea region will increase prices and add further fuel to food inflation.”
Brazilian Farmers Rush to Secure Fertilizers on Ukraine War Fears
Tatiana Freitas and Tarso Veloso
Fri, February 25, 2022
(Bloomberg) -- Farmers in Brazil, the world’s top fertilizer importer, are rushing to secure crop nutrients as the Russian attack on Ukraine spreads fears of a global shortage.
“Farmers are scared, rushing to buy potash,” said Jose Marcos Magalhaes, president of the Minasul co-operative, Brazil’s second-largest coffee exporter.
The rush to ensure crop nutrients in Brazil illustrates the shock waves the invasion of Ukraine is sending through agricultural, metal and energy markets. Russia is a key supplier of potash and other crop additives, as well as a major exporter of aluminum, grains, crude oil and natural gas. Brazil, an agriculture powerhouse that leads production of soybeans, coffee and sugar, imports around 80% of its fertilizer needs.
Minasul, which has farm-supplies stores in the southeastern state of Minas Gerais, saw its daily sales of agriculture inputs jump to about 20 million reais ($4 million) on Thursday, from the usual 2 to 3 million reais.
“We made half of February sales in the past couple of days,” Magalhaes said, adding it’s so far been able to meet the surge in demand thanks to its stockpiles.
In Brazil’s far west, farmers haven’t been so lucky. Some grain producers in Mato Grosso state, the nation’s biggest soybean grower, haven’t even been able to get price quotes and delivery estimates from their fertilizer dealerships in the past three days. Importers haven’t received price lists from their overseas suppliers either, according to Jeferson Souza, fertilizer analyst for Agrinvest Commodities.
“Fertilizer prices in the Brazilian market were thrown into uncertainty by Russia’s invasion of Ukraine and may remain unstable into early March,” Marina Cavalcante, an analyst for Bloomberg’s Green Markets, wrote Friday in a report.
Following price increases early in the week, fertilizer suppliers suspended price lists, according to Cavalcante. Market participants are cautious about new negotiations, concerned that further trade restrictions may be imposed, she said.
Brazilian soybean farmers are buying fertilizers for planting that starts in September and are likely to pay higher prices than U.S. producers who have already bought their nutrients, according to Souza.
The group representing fertilizer companies in Brazil, known as Anda, says it’s monitoring the risks of disruptions in the global fertilizer supply chain, including in Brazil.
“Any economic sanctions on Russia will affect fertilizer pricing and availability,” Cavalcante said.
Tatiana Freitas and Tarso Veloso
Fri, February 25, 2022
(Bloomberg) -- Farmers in Brazil, the world’s top fertilizer importer, are rushing to secure crop nutrients as the Russian attack on Ukraine spreads fears of a global shortage.
“Farmers are scared, rushing to buy potash,” said Jose Marcos Magalhaes, president of the Minasul co-operative, Brazil’s second-largest coffee exporter.
The rush to ensure crop nutrients in Brazil illustrates the shock waves the invasion of Ukraine is sending through agricultural, metal and energy markets. Russia is a key supplier of potash and other crop additives, as well as a major exporter of aluminum, grains, crude oil and natural gas. Brazil, an agriculture powerhouse that leads production of soybeans, coffee and sugar, imports around 80% of its fertilizer needs.
Minasul, which has farm-supplies stores in the southeastern state of Minas Gerais, saw its daily sales of agriculture inputs jump to about 20 million reais ($4 million) on Thursday, from the usual 2 to 3 million reais.
“We made half of February sales in the past couple of days,” Magalhaes said, adding it’s so far been able to meet the surge in demand thanks to its stockpiles.
In Brazil’s far west, farmers haven’t been so lucky. Some grain producers in Mato Grosso state, the nation’s biggest soybean grower, haven’t even been able to get price quotes and delivery estimates from their fertilizer dealerships in the past three days. Importers haven’t received price lists from their overseas suppliers either, according to Jeferson Souza, fertilizer analyst for Agrinvest Commodities.
“Fertilizer prices in the Brazilian market were thrown into uncertainty by Russia’s invasion of Ukraine and may remain unstable into early March,” Marina Cavalcante, an analyst for Bloomberg’s Green Markets, wrote Friday in a report.
Following price increases early in the week, fertilizer suppliers suspended price lists, according to Cavalcante. Market participants are cautious about new negotiations, concerned that further trade restrictions may be imposed, she said.
Brazilian soybean farmers are buying fertilizers for planting that starts in September and are likely to pay higher prices than U.S. producers who have already bought their nutrients, according to Souza.
The group representing fertilizer companies in Brazil, known as Anda, says it’s monitoring the risks of disruptions in the global fertilizer supply chain, including in Brazil.
“Any economic sanctions on Russia will affect fertilizer pricing and availability,” Cavalcante said.
UPDATE 1-Brazil farmers brace for potential fertilizer pinch due to Ukraine crisis
Thu, February 24, 2022,
(Adds statement from local association)
By Ana Mano
SAO PAULO, Feb 24 (Reuters) - Brazilian agricultural exports may lose their competitive edge due to a scarcity of fertilizer and soaring prices for the key material if Russia's invasion of Ukraine triggers Western sanctions on Russian fertilizer exports, according to analysts.
Brazil relies on imports for about 85% of its fertilizer needs. Russia is its biggest supplier of the NPK mixture of nitrogen, phosphorus and potassium.
Even before the Ukraine conflict, fertilizer prices were climbing due to global logistics issues, U.S. sanctions on Belarus and China's absence from the market since October.
The Ukraine crisis means Brazilian growers of soybeans and other agricultural commodities are potentially in for a rough time.
"It is the perfect storm," said Jeferson Souza, an analyst with Agrinvest Commodities.
"Brazil has the most to lose among the world's largest producers of soy," he said, adding that competitors such as the United States and Argentina do not use as much potassium fertilizer as Brazil.
The situation raises doubts about whether Brazil can expand its area planted with soy for the 2022/2023 crop, as costs may become prohibitive, Souza said.
ANDA, an association representing fertilizer companies in Brazil, said in a statement it is early to assess the impact of international sanctions stemming from Russia's attack on Ukraine, adding it is still evaluating the effects on the fertilizer market and on the food supply chain as a whole.
ANDA acknowledged risks regarding the lack of inputs to produce fertilizers as the conflict develops, and said it will work to create alternatives to ensure supplies.
Brazil bought about 40 million tonnes of fertilizer products in 2021, a record high, with Russia accounting for some 9 million tonnes of imports, according to data compiled by Agrinvest.
There is a real possibility of Brazil having an immediate "potassium supply crisis," said Marcelo Mello, head of the fertilizer desk at StoneX, referring to the commodity that has farmers the most worried.
He said simultaneous sanctions on Russia and Belarus would leave farmers without enough of the fertilizer.
"The impact can be felt already, as the supply of fertilizers has been hampered by the low availability of maritime transport," said agribusiness lawyer Frederico Favacho.
Favacho noted that other areas of trade will also be affected by an escalation of the Ukraine conflict, as Russia is a big buyer of Brazilian meats.
Potential financial sanctions against Russia would hamper that trade too, he said. (Reporting by Ana Mano; Editing by Brad Haynes, Bill Berkrot and Cynthia Osterman)
Thu, February 24, 2022,
(Adds statement from local association)
By Ana Mano
SAO PAULO, Feb 24 (Reuters) - Brazilian agricultural exports may lose their competitive edge due to a scarcity of fertilizer and soaring prices for the key material if Russia's invasion of Ukraine triggers Western sanctions on Russian fertilizer exports, according to analysts.
Brazil relies on imports for about 85% of its fertilizer needs. Russia is its biggest supplier of the NPK mixture of nitrogen, phosphorus and potassium.
Even before the Ukraine conflict, fertilizer prices were climbing due to global logistics issues, U.S. sanctions on Belarus and China's absence from the market since October.
The Ukraine crisis means Brazilian growers of soybeans and other agricultural commodities are potentially in for a rough time.
"It is the perfect storm," said Jeferson Souza, an analyst with Agrinvest Commodities.
"Brazil has the most to lose among the world's largest producers of soy," he said, adding that competitors such as the United States and Argentina do not use as much potassium fertilizer as Brazil.
The situation raises doubts about whether Brazil can expand its area planted with soy for the 2022/2023 crop, as costs may become prohibitive, Souza said.
ANDA, an association representing fertilizer companies in Brazil, said in a statement it is early to assess the impact of international sanctions stemming from Russia's attack on Ukraine, adding it is still evaluating the effects on the fertilizer market and on the food supply chain as a whole.
ANDA acknowledged risks regarding the lack of inputs to produce fertilizers as the conflict develops, and said it will work to create alternatives to ensure supplies.
Brazil bought about 40 million tonnes of fertilizer products in 2021, a record high, with Russia accounting for some 9 million tonnes of imports, according to data compiled by Agrinvest.
There is a real possibility of Brazil having an immediate "potassium supply crisis," said Marcelo Mello, head of the fertilizer desk at StoneX, referring to the commodity that has farmers the most worried.
He said simultaneous sanctions on Russia and Belarus would leave farmers without enough of the fertilizer.
"The impact can be felt already, as the supply of fertilizers has been hampered by the low availability of maritime transport," said agribusiness lawyer Frederico Favacho.
Favacho noted that other areas of trade will also be affected by an escalation of the Ukraine conflict, as Russia is a big buyer of Brazilian meats.
Potential financial sanctions against Russia would hamper that trade too, he said. (Reporting by Ana Mano; Editing by Brad Haynes, Bill Berkrot and Cynthia Osterman)
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