Fertilizer prices were rising even before Russia invaded Ukraine, says a professor. Photo / 123RF
By Sally Murphy and Andrew McRae of RNZ
Farmers will face rising fertilizer costs as global demand is affected by import bans and tariff hikes imposed on Russia due to its invasion of Ukraine.
And these higher costs will eventually be passed on to the consumer.
In response to the war, the government announced a 35% tariff on all imports from Russia.
In 2021, New Zealand imported nearly $18 million worth of fertilizer from Russia, one of the world’s top suppliers.
While this only accounted for about 15% of fertilizer imports last year, worth $1.03 billion, the loss of Russian fertilizers to the global market will be hard felt.
Alan Renwick, professor of agricultural economics at the University of Lincoln, said this would have a major impact on food prices in general.
“We are competing for the fertilizer that is available and clearly it will go where the highest price is being paid, so if there is such market disruption then our prices will go up.”
He said fertilizer prices were rising even before Russia invaded Ukraine.
“Fertilizers require a lot of natural gas to produce and those prices have gone up, so there was already a lot of pressure on fertilizer prices before the Russian and Ukrainian incident happened.”
He said the Ukraine crisis had exacerbated the situation.
”It was a real response in a sense in part to the rising fuel prices that were happening as we left Covid and the world started up again. It just made a bad situation worse.”
Fertilizer Association chief executive Vera Power said the international market was under pressure.
“At the same time, many other countries are looking to secure their own supplies, so they are exporting less and this is adding to already tense shipping challenges around the world.
“It certainly creates a very complex international environment.”
Power said the two major fertilizer companies, Ballance Agri Nutrients and Ravensdown, had not imported products from Russia recently.
She said the fertilizers come from a number of countries, including China, Canada, Saudi Arabia, Vietnam and South Africa.
”There is a wide range of countries.”
“The relationships that large cooperatives have internationally are becoming increasingly important,” she said.
Renwick said the two cooperatives, which were responsible for around 95% of imports, will continue to source from elsewhere.
“Maybe we can’t get the fertilizer, but the fact is we’re going to have to pay top dollar to get that fertilizer and that’s where the pressure is going to be on our production costs, in especially in our dairy sector, where they obviously use a lot of grass to increase milk production.”
Last year, 2.7 million tonnes of fertilizer were imported into New Zealand.
Farmers will do with
Colin Hirst of Federated Farmers said farmers can use less fertilizer for a while, but there is a limit.
“…we can normally manage a year or two without putting in that much or not at all. It’s this whole question of price versus value that farmers will always be trying to figure out and see how it all might play out.
“Potentially they’ll use a lot less of it until prices get back to a more reasonable number, I guess.”
“It will eventually catch up with you, so it’s all about maintaining the existing levels of the elements in the ground. If you don’t maintain these levels, your productivity will drop.”
He said the reduction in the use of fertilizers applied phosphate and potassium, but not nitrogen.
Hirst said the three big expenses for farmers are interest rates, fertilizer, and then labor.
On his arable farm in South Canterbury, he spent around $250,000 a year on fertilizer.
”And we’re probably facing a 30% increase on that. ”
Professor Renwick said when prices rose farmers needed to think very carefully about how they used fertilizers and consider other options.
“Maybe use legumes or nitrogen-fixing plants in our system. Perhaps we can move to greater use of organic fertilizers.
“There’s a range of things we can apply to make sure we’re getting the most out of the fertilizer we’re using. It’s as much about timing and cutting back a bit, but it has a major impact on the system. , i.e. for Of course.”
Power said there was no risk that the country would run out of fertilizer.