US agriculture sector is about to feel the effects of the Ukraine-Russia conflict from fertilizers to food prices. Tom Vilsack, Secretary of Agriculture, warned the states against the price gouging in fertilizers, major agricultural export for Russia. US farm groups are waiting for the ripple effect on major crops due to the high energy costs, sanctions, and counter-sanctions.
Due to the Ukraine- Russia conflict, the US could face new demands to produce crops like wheat for allies in Europe. US farmers might see new markets to reach there but rising prices for commodities can affect everyone from farmers who buy seeds to sow to US consumers who can likely end up paying more at the supermarket. At an Agriculture department conference yesterday, Vilsack said that it’s too early to speculate on the effect o sanctions but also that he hopes no company takes the crisis “as an excuse to do something not necessarily supported by supply and demand.”
Russia is a vital source of the world’s fertilizer supply. Jason Troendle, director of market intelligence and research for the Fertilizer Institute, a US trade group said that natural gas is a top commodity for the country and the main ingredient for ammonia which is in turn, the main constituent of fertilizer.
The US along with Germany has put a hold on the Nord Stream 2 natural gas pipeline that used to supply Russian exports. Troendle said if Russian gas is hit with more sanctions, it would affect the prices and the European Union would have to turn to other sources. He added that although the US produces most of its natural gas, price spikes have a huge effect on the energy-intensive fertilizer industry.
Troendle also said that Russia accounts for 21 percent of the worldwide export of potash, which is a basic component of fertilizer. Belarus, which provided a route for Russian troops to enter Ukraine and is allied with Russia accounts for another 21 percent.
CEO of the National Association of Wheat Growers, Chandler Goule said that the conflict can affect the farms in Ukraine, which is a big grain producer if farmers are forced from their land. And although US wheat growers might be able to sell more to the allies who need the help, the farmers in the US are more likely to be hurt in the short period by the spike in prices and increasing fuel costs.
Another challenge posed by the Ukraine- Russia crisis is the agricultural commodities since, Russia exports, barley wheat, and sunflower oil. Its biggest grain customer is The Middle East, Turkey, and China. Goule added that the Ukraine- Russia conflict is definitely going to affect world supplies.
