Potential Impact of Russia-Ukraine War on the American Fertilizer Industry

After the Russia-Ukraine war, the already bottlenecked global fertilizer industry got hurt further. But this raises a thought – if Russian fertilizer exports go down, does that mean American companies will end up supplying more and grow? To evaluate this hypothesis, we will first look at how the Russian war may lead to fertilizer shortages in America. Then we will look at how the US could satisfy the shortage. Finally, we will look at the potential for American fertilizer companies to export to other nations that may be impacted by the war.

Common fertilizer used in America comprises of three components – Nitrogen, Phosphate, and Potash. The US has robust manufacturing of Nitrogen and Phosphate. Only 12% of Nitrogen, and 9% of Phosphate used in America is imported, and none of it comes from Russia or Ukraine. However, we rely heavily on imports for Potash. 93% of Potash used in America is imported, and 12% is imported from Russia and Belarus. Both nations face sanctions till some extent. Therefore, the Russia-Ukraine war may lead to domestic shortage in Potash.

In the US, three companies have roughly 49% market share in the fertilizer manufacturing industry – Cf Industries Holdings, Mosaic Co, and Nutrien Ltd. These companies have resources to produce Potash in the US as well as in Canada. Therefore, there is a possibility that if there is a reduced supply because of the war, and assuming the demand remains roughly the same, they may cash the opportunity. There are many smaller fertilizer manufacturing companies as well, however many are limited in their ability to manufacture Potash.

Finally, in 2021, roughly 17.2% of the industry revenue came from exports. And of all the export revenue, 20.6% came from Brazil. Brazil is one of the hardest hit nations for fertilizer because of the war. It imports 85% of its fertilizers of which roughly 50% is from Russia. This leads to US being a potential supplier to Brazil and other nations that may be facing a shortage.

Based on the high-level analysis presented in this article, the US fertilizer industry may see growth. However, a few questions that must be evaluated further are – whether the US can increase Potash and other fertilizer production, and could we successfully export fertilizers to other nations.

References

• Colussi, Joana, et al. “War in Ukraine and Its Effect on Fertilizer Exports to Brazil and the U.S.” Farmdoc Daily, vol. 12, no. 34, Mar. 2022. farmdocdaily.illinois.edu, https://farmdocdaily.illinois.edu/2022/03/war-in-ukraine-and-its-effect-on-fertilizer-exports-to-brazil-and-the-us.html.
• Patel, Kush. Fertilizer Manufacturing in the US: 32531. IBISWorld, November 2021.
• Polansek, Tom, and Ana Mano. “As Sanctions Bite Russia, Fertilizer Shortage Imperils World Food Supply.” Reuters, 23 Mar. 2022. www.reuters.com, https://www.reuters.com/business/sanctions-bite-russia-fertilizer-shortage-imperils-world-food-supply-2022-03-23/.