ANOTHER COLLATERAL DAMAGE? LATIN AMERICAN FERTILIZER MARKET DISPUTE

Russian economic participation in global trade markets opened several collateral fronts in the economic effects of the special military operation in Ukraine and the sanctions imposed by the West. The world's largest plant food supplier went to war, and the West imposed more than 10,000 sanctions. As a result, the world's economies are facing cutbacks and rising prices for these agricultural inputs. The Latin American exchange, where two major G7 countries - the United States and Canada - were displaced by Russia and China as the two largest fertilizer suppliers, is in dispute.

Three nations with which the West has the most significant geopolitical tensions, Russia, China, and Belarus, occupied three positions among the five largest net exporters of plant foods until 2020. The three countries hold 58.1% of the total net exports; in 2021, Russia and China exported 28.2% of the world's total.

Despite the importance of fertilizers in the Russian economy, they are not on the sanctions list. The above did not stop global supply cuts and the rise in its price. Since the start of the special military operation, Russia announced a reduction in the export of plant foods to protect its farmers and peasants. Similarly, the exclusion of Russia from the Swift payment system has made purchasing them on the international exchange more challenging. On the price side, the cost of transport insurance and logistical problems have also deteriorated trading conditions on the global wholesale. Transport logistics operators, banks and insurance companies have decided to stay out of trade with Russia for fear of breaching sanctions. As a result, Russian plant food exports fell by 24% by May 2022. 

Farmers and authorities have declared problems in the fertilizer market in several Latin American countries. Dependence on Russian supply is not negligible. In 2021, 25.7% of the world's total plant food imports were made by Latin America and the Caribbean, representing USD 25.2 billion (Figure 1); Russia comprised 22% of them. All of Latin America and the Caribbean, except for Venezuela and Trinidad and Tobago, are net importers of fertilizers. Brazil is the largest importer in the region and also in the world.

With the United States and Canada as major Latin American suppliers, the clash of geopolitical forces is also occurring in plant foods. Since 2010, Russia has dominated this trade. The United States, for its part, has lost its status as the region's second-largest supplier to China. China accelerated its participation as a supplier between 2010 and 2014 when it caught second place with the U.S. As a bloc, China and Russia gained a significant market share in 2021, claiming 47% of the additional USD 11 billion the region purchased in fertilizers that year.

Thus, the Latin American plant food wholesale is in dispute. The difficulty of acquiring fertilizers in Russia and the increase in prices will turn the search for buyers to the nearest markets. The United States and Canada, the most significant suppliers outside Russia, would be the clearest purchase destinations.

Table 1.

Share of U.S. and Canadian fertilizer exports to Latin America and the Caribbean.

País	Destino	2017	2018	2019	2020	2021
Estados Unidos	Brasil	48.5%	53.1%	47.5%	43.6%	54.0%
	México	16.5%	15.8%	16.3%	14.8%	14.4%
	Colombia	7.1%	6.3%	6.5%	8.0%	8.2%
	Argentina	5.5%	5.3%	10.5%	10.1%	5.4%
	Perú	5.2%	4.9%	4.4%	5.3%	4.3%
	Resto de ALyC	17.2%	14.5%	14.7%	18.2%	13.7%
Canadá	Brasil	79.7%	79.5%	86.1%	85.8%	86.5%
	Colombia	6.1%	4.9%	4.1%	3.4%	4.1%
	Uruguay	3.6%	4.4%	2.7%	1.4%	2.8%

The stability of U.S. exports to Latin America refers to Brazil, Mexico, Colombia, Argentina, and Peru, which account for 86.3% of its sales in 2021. Canada, for its part, concentrates the same value in a single country, Brazil. Gaining a larger share involves addressing needs in these markets, which is problematic. Brazil continues to maintain its trade with Russia, and plant foods are no exception. Argentina, in turn, announced a $1.25 billion Chinese capital investment for a plant food plant; the Mexican government is promoting its production with PEMEX to supply the long-term availability of nitrates, potash and phosphates, the main inputs for chemical fertilizer production.

With the problems in the plant food wholesale, it is increasingly clear that the war and the sanctions imposed by the West will not only affect the former Soviet country. Europe is already experiencing this with gas. It is uncertain whether the region's plant food demands can be met by its closest suppliers in the short term, whether the governments' plans are sufficient to compete on price and volume in the long term, or whether the West will expressly include plant foods in the sanctions. What is clear is that the Latin American market has entered into dispute, and meanwhile, the collateral damage of the war continues to sprout all over the world, this time in Latin America.

Download / Español