Last week, I had the chance to attend an in-person Commodity Classic, finally! After a two-year absence, the show returned to hosting “live” attendees in New Orleans, LA, between March 9 and 12. For the most part, people and exhibitors at the 2022 Commodity Classic “talked shop” – new product releases, equipment innovations, anticipated planting trends, and the state of the overall agricultural market.
There were, however, two other topics that frequently came up in casual conversation. One was Russia’s war with Ukraine and the terrible cost on “human life and world security” this is inflicting. Tied to this was the impact these events are/could have upon the fertilizer marketplace and ag retailers and their grower-customers ability to prepare their crop fields for the 2022 planting season.
Thankfully, from the viewpoint of numerous growers and ag retailers CropLife spoke with at Commodity Classic, it sounds as if the spring fertility application season will go off without too much disruption. Virtually all of the growers said they anticipated that their crop nutrient needs for spring planting “would be there.” Luckily, most of the ag retailers we talked to said exactly the same thing, many adding they were ready for the current planting season with supplies “if no other unexpected things pop up.”
And even though the 2022 Commodity Classic just ended on March 12, two “black swans” have already “popped up.” On March 11, Russia formally decided to “temporarily suspend fertilizer exports.” In a statement, the Russian Trade Ministry said this move was being taken “until carriers resume rhythmic work and provide guarantees that Russian fertilizer exports will be completed in full.” According to the United Nations Comtrade database, the U.S. imported $1.28 billion worth of Russian fertilizer during 2021.
According to Sam Taylor, Executive Director for Research at RaboBank, this could have significant impact on the world’s available fertilizer supply. “Russia is a key producer and exporter of fertilizers across the key groups,” says Taylor. “Russia and Belarus together account for about 40% of potash exports. Russia accounts for about 20% of global exports of ammonia. They account for about 40% of global exports of urea. They also have a sizable position in the ammonium nitrate market into Brazil and some parts of Europe. They also have global influence across other parts of MAP/DAP and sulfur. They also supply natural gas into Europe, which is used to make anhydrous ammonia.”
Taylor adds that since the Russian Trade Ministry had first hinted at a suspension of fertilizer exports back in early March, this news wasn’t a complete surprise. The key will be how long this suspension of exports lasts, however. “We factored in disruption to trade flows and the ‘temporarily’ in the statement is more of a status quo than a change,” he says. “Now if that ‘temporary’ is sustained over a period of months, then we will have to adjust the view.”
While the Russian fertilizer export suspension may not have an immediate impact on the U.S. agricultural marketplace, the second black swan might. On March 7, the union representing thousands of railroad workers at Canadian Pacific Railway Ltd. authorized its membership to strike, starting at midnight on March 16, if no agreement had been reached with Canada’s second biggest railroad company. At issue were wages, benefits, and pensions.
“Should the (union) exercise its right to strike, CP will be unable to operate the railroad,” wrote CP Chief Marketing Officer John Brooks in a March bulletin.
Naturally, industry trade groups are getting involved in the dispute. In a March 7 letter to President Joe Biden, The Fertilizer Institute (TFI), the National Grain and Feed Association, and 19 other members of the Agricultural Transportation Working Group requested the administration work with the Canadian government to avert a major railway labor strike and to rescind the cross-border vaccine mandate for workers moving essential commerce.
“(I)f the U.S. and Canadian governments allow the following supply chain disruptions to persist into the spring fertilizer season, the impacts to our industry and North American farmers could be devastating,” the working group noted. “A CP railway strike would severely curtail fertilizer supply and shipments into the United States and would happen at the worst possible time as farmers are planting their 2022 crops. Given the fragility of current supply chains, urgent attention and engagement with all parties is needed to avert a potential strike.” The letter also noted that grain is CP’s largest line of business and approximately 10% to 15% percent of CP’s business is fertilizer, particularly potash.
At press time, no agreement had reportedly been reached between the two parties. However, since Canadian law requires a 72-hour notice before a work stoppage can occur, and this hasn’t happened yet, observers say the likelihood of any strike taking place prior to this weekend (March 19-20) is remote.
So, plenty of questions still surround the fertilizer category as agriculture enters the spring season . . .
For Fertilizer, Plenty of Questions and ‘Black Swans’