Russia, the world’s largest producer of fertilizers, has steadily curtailed the flow of natural gas into Europe, driving up not only fuel prices but also the cost of nitrogen-based fertilizers. As fertilizer prices have risen, wheat prices have also risen in the past week.
Because Russian fertilizer is so important to the global agricultural trade, it is has avoided international sanctions that have curtailed other Russian exports, giving Moscow political leverage over another crucial good the world needs.
Lower prices are not necessarily a good thing for wheat producers.
Higher fuel and fertilizer costs reduce the profits farmers can make and create a dilemma for wheat-producing countries. That’s especially true in Ukraine, where the war has made transporting wheat to buyers abroad costly, says Dan Basse, an agricultural economist and president of AgResource, an analytics firm.
While high prices hurt wheat importing countries, low prices could deter farmers from planting additional plants this year, especially in Ukraine, as they face challenges to sell their current crop, leaving them unable to afford to grow more. .
Egypt and Indonesia rely heavily on Ukrainian wheat, and famine-ravaged Somalia imports wheat mainly from Ukraine and Russia.
The USDA predicts that the 18.8 million tons of wheat that Ukraine has exported in the past 12 months will drop to about 10 million in the next 12 months.