Salvatore Capasso, Giovanni Canitano (a cura di)
Mediterranean Economies 2023
DOI: 10.1401/9788815411167/c9
Furthermore, the war came at a time when the global food system struggled to feed its growing population in a sustainable way, under the pressure caused by climate change, conflicts, and the COVID-19 pandemic, which created persistent vulnerability and introduced a further layer of uncertainty into global food
{p. 304}markets. In its Hunger Hotspot report, the World Food Programme (WFP) identifies violent conflicts as the primary driver of global hunger as they can displace farmers, destroy agricultural assets and food stocks, or disrupt markets. It also describes climate change as the main factor in reducing global agricultural production by decreasing cropping frequency and yields [WFP and FAO 2022] [4]
.
The Russia-Ukraine crisis and associated sanctions on Russia and Belarus also disrupted global fertilizer markets. Nitrogen (N), phosphate (P) and potash (K) play a key role in nourishing plants and promoting crop growth with higher yields. The fact that a small number of countries produce a large share of internationally traded fertilizers and about three quarters of all countries import at least 50 per cent of their fertilizer consumption, makes the fertilizer sector extremely vulnerable to trade shocks. Russia and Belarus are important producers of all three major fertilizer nutrients: in 2020, Russia accounted for 14 per cent of global trade in urea, 11 per cent of global trade in phosphate and, jointly with Belarus, 41 per cent of global trade in potash [Glauber and Laborde 2022].
Before the Russian invasion, fertilizer prices were already at historically high levels because of several factors that acted on demand and supply. Fertilizer demand declined during COVID-19 lockdowns and rebounded in late 2020 as restrictions were lifted and crop prices rose. On the supply side, increases in the costs of key inputs in fertilizer production, such as natural gas and coal and raw materials, also added upward pressure on prices. The economic sanctions on Russia and Belarus and disruptions in Black Sea trade routes added further uncertainty, driving fertilizer prices higher. IFPRI estimated that potash exports from Belarus and Russian urea and potash exports were at least 50 per cent lower in 2022 than in 2021 because of the sanctions and restrictions on using EU territory for transit [Glauber and Laborde 2022]. In addition, the shutdown of the Tolyatti ammonia pipeline, built to transport ammonia from Russia’s Volga region to Ukraine’s Black Sea port of Odessa, contributed to a dramatic decline {p. 305}of Russian ammonia exports [5]
. Countries heavily dependent on fertilizer imports from Russia and Belarus feared an immediate shortfall, and many had to secure alternative sources from a very tight global market. Brazil, the second largest importer of potash, increased imports from Canada to help offset the decline from Belarus; and Morocco, the fourth largest global ammonia importer, stepped up imports from Saudi Arabia and Egypt to make up for shortfalls from Russia [Glauber and Laborde 2022].
To secure the supply of food and fertilizers at home, several governments decided to modify their food trade policies by increasing export-related restrictions, including licensing requirements, taxes, and bans, as already happened in the previous crises (COVID-19 pandemic; 2007-2008 and 2010-2011 global food crises). These measures helped countries to mitigate and cope with conflict damage to their domestic economies, but they also fuelled war-related disruptions in global markets, contributing to higher prices and price volatility. As data show, since the conflict, the number of countries that implemented food export restrictions rose exponentially (lower panel of fig. 2).
In addition to Ukraine and Russia, other notable suppliers imposed trade measures, such as Indonesia (ban on palm oil exports), Argentina (ban on beef exports), and Turkey, Kyrgyzstan and Kazakhstan (bans on a variety of grain products) [6]
(tab. 2).
At the peak of export restrictions in late May, almost 17 per cent of global food and feed exports on a caloric basis were affected by measures implemented by countries (upper panel of fig. 2).
Export restrictions did not only concern food products but also key agricultural inputs, especially fertilizers. To prioritize domestic farmers in a context of limited availability and amid high prices, several countries such as China and South Korea, banned fertilizers exports, furthering contributing to market instability (tab. 3).{p. 306}
Fig. 2. Share in global trade of calories and number of countries implementing food export restrictions.
Source: Laborde and Mamun [2022].
Tab. 2. Export restrictions on food during the Ukraine crisis
Country
Type of food product
Ban end date
Argentina
Soybean oil, soybean meal
Dec 31, 2023
Algeria
Pasta, wheat derivatives, vegetable oil, sugar
Dec 31, 2022
Egypt
Vegetable oil, maize
June 12, 2022
Egypt
Wheat, flour, oils, lentils, pasta, beans
June 10, 2022
India
Wheat
Dec 31, 2022
Indonesia
Palm oil, palm kernel oil
Dec 31, 2022
Iran
Potatoes, eggplant, tomatoes, onion
Dec 31, 2022
Kazakhstan
Wheat, wheat flour
June 15, 2022
Kosovo
Beef, mutton, goat meat, butter, cooking oils
Dec 31, 2022
Ukraine
Wheat, oats, millet, sugar
Dec 31, 2022
Russia
Sugar, sunflower seeds
Aug 31, 2022
Russia
Wheat, meslin, rye, barley, maize
June 30, 2022
Serbia
Wheat, corn, flour, oil
Dec 31, 2022
Tunisia
Fruits, vegetables
Dec 31, 2022
Kuwait
Chicken meat products, grains, vegetable oils
Dec 31, 2022
 
 
 
Source: FSIN [2023].
After May, many countries partially removed trade policy measures. By mid-July, the amount of affected trade fell to 7.3 per cent, mainly remaining at that level over the rest of 2022 (tabs. 1, 2 and 3). The removal of export restrictions, in addition to several other factors, such as good summer harvests and the Black Sea Grain Initiative (BSGI), positively affected global markets, averting an unprecedented global food crisis. In particular, since the signing of the BSGI, ship departures from Ukrainian ports have shown a marked increase and more than half of Ukrainian grain exports have been supported by the agreement (fig. 3) [7]
. {p. 308}
Tab. 3. Export restrictions on fertilizers during the Ukraine crisis
Policy status
Category
Country
Product
Ending day
Share of global exports of nitrogenous impacted (%)
Share of global exports of potash impacted (%)
Share of global exports of phosphates impacted (%)
Inactive
Actual ban
China
Phsphate rock
12/31/22
0.0
0.0
0.6
Inactive
Actual ban
Korea, South
Urea fertilizer
03/31/22
0.3
0.0
0.0
Inactive
Actual ban
Russia
Fertilizer
08/31/22
10.1
18.7
8.6
Inactive
Actual ban
Ukraine
Nitrogenous
12/31/22
0.9
0.2
0.0
Inactive
Export Licensing
China
Fertilizers
12/31/22
10.6
1.2
11.4
Inactive
Export licensing
Russia
Nitrogenus fertilizers
12/31/22
10.1
2.8
8.5
 
 
 
 
 
 
 
 
Note
[4] The IPCC estimates that climate change has reduced agricultural productivity growth by 21 per cent since 1961, and by up to 34 per cent in Africa and Latin America [Quagliarotti 2023].
[5] The pipeline from Russia to Odessa was designed to pump up to 2.5 million tons of ammonia per year. From Soviet times, ammonia travelled south-east along a 2,418-kilometre pipeline that crosses Ukraine for over a thousand kilometres from the Russian border to the Black Sea. From there the fertilizer reached the rest of the world by ship.
[6] While countries restricted food exports to ensure adequate supplies for their population during the conflict, Russia restricted food exports mainly to respond to the economic sanctions imposed by the European Union, United States, Canada and other countries.
[7] A widespread food global crisis has been averted only thanks to the intervention of the international community. In May 2022, the European Commission launched the EU Solidarity Lanes Initiative to help Ukraine to bypass the blockade of Ukrainian seaports by the Russian army and other supply chain disruption, facilitating the export of Ukrainian agricultural products to third countries using EU land routes and seaports and freeing storage capacity for the new harvest. In addition, in July 2022, two agreements were signed: the Memorandum of Understanding between the United Nations and the Russian Federation to facilitate the unimpeded access of food and fertilizers exports to global markets; the BSGI, signed by the Russian Federation, Turkey and Ukraine, and witnessed by the United Nations to allow the safe export of grain, fertilizers and other foodstuff from Ukrainian ports in the Black Sea. Before the war, more than 90 per cent of ships had departed from seaports. Between the onset of the war and the implementation of the BSGI, this share abruptly dropped to 20 per cent and rivers became the main shipping routes for Ukrainian exports. After the signing of the BSGI, the share almost doubled. The agreement helped to bring down the cost of food, stabilize global markets and keep them open.