One of the world's biggest fertiliser companies, Yara International, which operates in more than 60 countries, buys considerable amounts of essential raw materials from Russia which produces enormous amounts of nutrients, like potash and phosphate - key ingredients in fertilisers, which enable plants and crops to grow. About a quarter of the key nutrients used in European food production comes from Russia. The Russian government urged its producers to halt fertiliser exports.
Nutrients aren't the only factor to consider, either. Huge amounts of natural gas are needed to produce ammonia, the key ingredient in nitrogen fertiliser. Yara International relies on vast quantities of Russian gas for its European plants.
Last year, it was forced to temporarily suspend production of about 40% of its capacity in Europe because of the spike in the price of wholesale gas. Other producers also cut supplies.
Combined with higher shipping rates, sanctions on Belarus (another major potash supplier) and extreme weather - this prompted a big jump in fertiliser prices last year, adding to a surge in food prices.
Yara's boss, Svein Tore Holsether, explained fertiliser prices were already high due to soaring wholesale gas prices but with the war, he has warned the situation could get even tougher.
"We were already in a difficult situation before the war... and now it's an additional disruption to the supply chains and we're getting close to the most important part of this season for the Northern hemisphere, where a lot of fertiliser needs to move on and that will quite likely be impacted."
Russia and Ukraine are some of the biggest producers of agriculture and food globally.
"Half the world's population gets food as a result of fertilisers and if that's removed from the field for some crops, the yield will drop by 50%," Mr Holsether said. "For me, it's not whether we are moving into a global food crisis - it's how large the crisis will be."
Analysts have also warned of higher costs for farmers and lower crop yields. That could feed through into even higher costs for food.
Yara International's chief executive describes the war as "a catastrophe on top of a catastrophe", highlighting just how vulnerable to shocks the global food supply chain now is. It will increase food insecurity in poorer countries, he adds.
"We have to keep in mind that in the last two years, there's been an increase of 100 million more people that go to bed hungry...so for this to come on top of it is really worrying."
No comments:
Post a Comment