“Hunger problems” will arise in some countries because of the blow to world potash exports stemming from the Ukraine war, ICL warned, noting a “missing” 2m tonnes in supplies to key food exporter Brazil.
Potash from Belarus – which was the subject of European sanctions even before attracting more widespread measures because of its support for Russia’s invasion of Ukraine – “is not coming out of the mines and not entering into the market”, said Raviv Zoller, the chief executive of the Israeli-based fertilizer producer.
While some Russian potash supplies had been reaching the market “that product went out of Russia a long time ago”, before it too was targeted by Western curbs.
Aviram Laham, the ICL finance director, said that “for potash in particular, existing sanctions on Belarus have been compounded by international sanctions in Russia, resulting in further tightening of supply since these two countries accounted for approximately 40% of potash supply in 2021”.
Nutrien, a Canada-based rival to ICL, has estimated at 2m-6m tonnes the drop in Russia’s potash output this year, from an operational capacity of 15m tonnes, while foreseeing a 6m-8m-tonne dip in Belarus production, potentially half its capability of 13m tonnes.
The squeeze meant that “some countries that don’t have the means and don’t have the access to Belarus or even Russian product are not going to be able to get” potash, Mr Zoller told investors.
“That’s going to cause quite a lot of hunger problems in various places.”
He noted that “in some countries, governments are becoming aware of potential demand destruction that will cause hunger issues.
“As a result, India has raised subsidies very significantly for potash and for phosphate,” he said, noting too the support by the UK to nitrogen fertilizer group CF Industries, which owns two plants in the country.
Mr Zoller flagged too reports that “France is now giving grants to farmers at the private farmer level to make sure that applications happen.
“At the end of the day fertilizers are responsible for about 50% of global production of agriculture. There won’t be enough food. The implications are very, very, significant.”
He highlighted a shortfall in supplies for Brazil – a key exporter of the likes of coffee, corn, soybeans and sugar, but importer of many fertilizers and agrichemicals – where “there’s over 2m tonnes of potash missing.
“Brazil has to have the potash because the type of land that is there in Brazil, demands potash that they can’t skip a season” of applications, Mr Zoller said, foreseeing “some demand destruction in Europe” too.
Despite such consumption losses “we definitely don’t see a softness” in potash prices, given the shortfall in former Soviet Union supplies and the prospect of a demand catch-up in 2023.
“Anybody that skips a season, this season will need more potash next year.
“So that means that once, market comes back and maybe if sanctions are lifted and product comes back, there’ll be more demand for potash next year.”
‘Huge supply gap’
The outlook was echoed separately by Burkhard Lohr, chief executive at K+S, who said that “we are not expecting potash prices to increase even more” this year from the current “historical high levels”.
“But on the other hand, with this supply shortage, we are not seeing prices decreasing either,” he said.
He said that Belarus product was now limited to domestic and Russian markets, with “some ships, but not many coming from Russia into the market.
“So we have a huge supply gap and customers are buying whatever they can.”
Meanwhile, he added that “we know that June, July will be heavy season again in Brazil” in demand terms, “so there is rather a shortness”.
On phosphates, ICL’s Mr Zoller said that prices would “depend more” on decisions made by key exporters China, on how firmly they control shipments, and Morocco, on how much diammonium phosphate they produce.
Making DAP, the benchmark form of phosphate in fertilizers, requires access to supplies of nitrogen products which are being squeezed because of the high prices of gas, the key raw material for manufacturers.
Moroccan phosphate groups “don’t have the quantities of ammonia necessary for DAP. So that means that… there could be shortage” of phosphate supplies.