From fertilisers to food prices, the US agriculture sector is about to feel the effects of the Ukraine-Russia conflict. Secretary of Agriculture Tom Vilsack warned states against price gouging in fertilisers, a major agricultural export for Russia. Due to high energy costs, sanctions, and counter-sanctions, US farm groups are anticipating a ripple effect on major crops.
Because of the Ukraine-Russia conflict, the United States may face new demands to produce crops such as wheat for European allies. US farmers may see new markets to enter, but rising commodity prices can affect everyone, from farmers purchasing seeds to sow to US consumers who may end up paying more at the supermarket. Vilsack said yesterday at an Agriculture Department conference that it is too early to speculate on the impact of sanctions, but that he hopes no company uses the crisis “as an excuse to do something that is not necessarily supported by supply and demand.”
Russia is an important source of fertiliser for the rest of the world. According to Jason Troendle, director of market intelligence and research for the Fertilizer Institute, a US trade group, natural gas is the country’s top commodity and the main ingredient for ammonia, which is the main constituent of fertiliser.
The United States and Germany have put a halt to the Nord Stream 2 natural gas pipeline, which was used to supply Russian exports. According to Troendle, if more sanctions are imposed on Russian gas, prices will rise and the European Union will be forced to seek alternative sources. He went on to say that, while the United States produces the majority of its natural gas, price increases have a significant impact on the energy-intensive fertiliser industry.
Troendle also stated that Russia accounts for 21% of global potash exports, which is a basic component of fertiliser. Another 21% is accounted for by Belarus, which provided a route for Russian troops to enter Ukraine and is allied with Russia.
Chandler Goule, CEO of the National Association of Wheat Growers, stated that if farmers are forced from their land, the conflict could have an impact on farms in Ukraine, which is a major grain producer. And, while US wheat growers may be able to sell more to allies in need, farmers in the US are more likely to be harmed in the short term by price increases and rising fuel costs.
Another issue posed by the Ukraine-Russia crisis is the agricultural commodities that Russia exports, such as barley wheat and sunflower oil. The Middle East, Turkey, and China are its top grain customers. Goule went on to say that the Ukraine-Russia conflict will undoubtedly have an impact on global supplies.