Belarus’ inability to ship potash through trade-insulated Russia is leading to a worse-than-expected fertilizer supply shortage.
Analysts believed Belarus, which together with Russia supplies 37% of the world’s potash, would ship some of its product via Russia after Lithuania banned the landlocked country from using the port of Klaipeda from 1 february. But Russian ports are hard to reach due to economic sanctions aimed at punishing the country for its Feb. 24 invasion of Ukraine, and now it appears Belarusian potash just isn’t making it to market. Meanwhile, as potash prices continue to soar, on the demand side, there are concerns that farmers may balk at buying fertilizer, sacrificing crop yields to try to protect their margins.
|It seems that potash mining in Belarus, underground operations like the Jansen potash project proposed here, has come to a halt.
Source: BHP Group
“Overall, we think we’re looking at a reduction in total shipments of more than 10% this year out of 2021…something in the order of more than eight million tonnes,” said CRU fertilizer analyst Humphrey Knight.
Without access to Russian or Lithuanian ports, Belarus is limited to land navigation. JSC Belaruskali, the Belarusian state-owned potash mining company, could not be reached for comment.
“We are aware of some small rail shipments coming into Russia and possibly China, but they are very limited in nature,” Knight said, pointing to shipping logistics and banking as the main issues. . “The restrictions imposed on Belarus are extremely severe.”
Destruction of the request
As market turmoil worsened, potash prices surged and remained at a record highy, raising questions about how customers, primarily farmers, will respond to both more expensive inputs and a lack of supply.
“Potash demand is slowing by [Southeast] from Asia (especially Indonesia) to the American Midwest,” Scotiabank analyst Ben Isaacson said in an April 4 note.
But some analysts say soaring crop prices will help shield farm profits from rising input costs.
“As a result, we do not believe demand destruction is likely in the near term,” Canaccord Genuity Capital Markets analyst James Bullen said in an April 4 note. Bullen also pointed to lower Ukrainian exports of wheat, seed oils and corn supporting crop prices.
Still, CRU’s Knight noted that while crop prices are on the rise, fertilizer prices have climbed even higher over the past year.
“It’s not terrible, but it’s not as good as it used to be,” Knight said, referring to relative increases in crop and fertilizer prices.
Although a cost-benefit analysis of fertilizer application to increase yield plays a central role in farmers’ decision-making, it’s not the only consideration, said Aaron Smith, DeLoach Professor of Economics. agriculture at the University of California at Davis.
“I think risk aversion plays an important roleimportant role here,” Smith said in an interview. “Farmers worry about not applying enough fertilizer and not getting the yields.”
Similarly, there could be some weakness in potash demand this year, as purchases have been strong in 2021.
“Many downstream markets bought extremely heavily last year, reducing their need to buy as much this year,” Knight said.
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- Kip Keen