A gray cloud threatens to bring problems to farmers: the possibility that the war in Ukraine will affect the supply of fertilizers. Russia is the main supplier of this product and now there are logistical problems for that country to export it.
At the beginning of the war, shipping companies suspended routes and some ports closed for security reasons, or due to occupation by the Moscow Armed Forces. This is making the transport of fertilizers more expensive, which was already complicated due to the “container crisis” that was unleashed by the boom in trade after the pandemic.
In addition, the economic sanctions implemented by the United States and Europe against Moscow alter international trade payments. Exporters and importers fear that the bank they work with will stop operating in the world market, so they will not be able to charge or pay for the products.
Russia is the leading supplier of fertilizers in the Ecuadorian market, with a 38% share. Trade between Russia and Ecuador amounted to $1.9 billion in 2021, 28.8% more than the previous year.
According to the Federal Veterinary and Phytosanitary Surveillance Service of Russia, Russian exports to Ecuador grew in 2021 by 2.1 times, up to $460 million. Those sales were concentrated in fertilizers, fuels and inorganic chemical products.
The consulting firm Oikonomics says there are two scenarios regarding the supply of fertilizers that can affect the Ecuadorian economy. The first, which is a moderate risk, points out that the consequences of the war could cause an “increase in the price of these products.” The second, more severe risk, would be “a higher cost of production for farmers.”
Food prices have already increased in Ecuador. One of the causes is the rise in the price of urea, one of the most used fertilizers in the Ecuadorian countryside. The cost per quintal went from $25, at the end of 2020, to $55 in January 2022.
According to data from the National Institute of Statistics and Censuses (INEC), in January 2022, monthly inflation was 0.72%, compared to the previous month, which was 0.07%, while in January 2021 it was stood at 0.12%. Annual inflation for January 2022 was the highest since 2016.
In its report, the INEC indicates that aside from transportation, the category of food and beverages was the one that most affected the increase in the Consumer Price Index, which closed with an annual variation of 2.56%. The categories of furniture and items for home maintenance also contributed to the rise.
Essential elements fertilizer may become hard to get
Ecuador buys fertilizers from Russia that contain minerals such as magnesium, zinc, copper, calcium and other essential elements to nourish the crops. The price of fertilizers has been on the rise, due to quota problems in shipping companies known as “the container crisis.”
Depending on the type of crop and soil, up to eight fertilizer applications may be needed. Therefore, a lack of the product can cause a lower production of the crops and, in some cases, the loss of the harvest.
There is another type of fertilizer that is used in the country, especially in the banana and plantain industry. These are NPK substrate fertilizers. The three letters stand for nitrogen, potassium, and phosphorous.
The import of NPK fertilizers comes mainly from Chile (28.15%) and Colombia (27.22%) followed by Norway (13.41%), Germany (11.13%) and Belgium (5.22%).
In the field of fertilizers with NPK substrate, Russia ranks sixth among Ecuador ‘s suppliers, with a market share of 3.56%. This type of fertilizer is used in the banana sector, basically to help “fill the fruit.”