Russian Fertilizer Export Duties: New Problems From Old Players

Last week I took a little time out from preparing my 2009 stale seedbed to travel to a Pioneer research farm near Chatham Ontario.  With visions of corn with 8 traits coming down the pipe, I thought I’d better get up to speed.  So what will they call that, octagon-stacked hybrids?  I digress.

One of the guest speakers that evening talked about the tension between Russia and the United States impacting world agricultural markets.  I didn’t quite get it; the war in far off Georgia seems a world away from southwestern Ontario.

In any case, being uncomfortably inquisitive, I asked the obvious question on what he meant, heard his answer and it still didn’t compute.  I left a business card with a Pioneer rep and the next day my cell phone rang with the answer.  I was told the Russians had started to deny entry for some American poultry products and this increasing tension may in the future lead to much more serious things affecting agricultural markets.

That intrigued me because I didn’t think the issue had much resonance when it comes to corn, soybean and wheat markets moving forward into future years.  In fact the only thing I could think of was future nitrogen exports from Russia, which could conceivable dry up if tensions increased.  With Russian, Belarus and the Ukraine being major nitrogen exporters, that messy little war in Georgia may be the precursor of supply hiccups in the years to come.

Needless to say as farmers we need to get used to such talk.  It has to do with the BRIC countries, Brazil, Russia, India and China.  We are used to talking about China and Brazil when it comes to grain and oilseed demand and supply.  Lots of my agricultural friends like to throw in India in that paradigm but you rarely hear about Russia.  Clearly though with Russia’s natural resource wealth and increasing belligerence in its “old neighbourhood”, the spectre of fertilizer price spikes based on happenings there are very real.

Case in point is a recent statement by First Deputy Prime Minister Viktor Zubkov in the Moscow times reported by Interfax.

“Russia could double or triple export duties on mineral fertilizers if producers do not sell to domestic farmers at an “acceptable” price.”

“There is only one way out: raising export duties. If we feel that fertilizer producers are not meeting agricultural producers halfway, we will go ahead and double or triple them.”
(The Moscow Times, Sept 4, 2008 Interfax)

Now, keep in mind many in the west don’t think anything happens in Russia without President Dmitry Medvedev or Prime Minister Vladimir Putin having their mark on it.  So maybe Viktor Zubkov doesn’t have a clue.  However, its pretty obvious if Russia starts putting higher and higher exports on Russian fertilizer products, global supplies will become increasingly restricted.  For those of us, thinking its already highway robbery, the spectre of that isn’t good.

I know what Russian fertilizer looks like.  About ten years ago, I ordered MAP from a local supplier.  When it arrived it was almost bright green going into my fertilizer wagon.  I motioned to the driver to shut it off because it looked like flawed urea.  However, he assured me it was MAP.  He then told me it came from Russia.  I couldn’t quite believe it.  Ten years later threatening to take that “green urea” off the market may surely hit me in the pocket book.

All of this is part of our new agricultural reality.  The burgeoning middle classes in the BRIC countries are changing our agricultural demand world.  However, Russia has a long Soviet memory, making their recent incursion into Georgia vaguely familiar.  I had family in Prague in 1968 when Soviet tanks rolled in.  Now in 2008 American Vice President Dick Cheney is in Georgia delivering $1 billion in reconstruction assistance.  Our American friends want Caspian oil via pipelines through Georgia to Black Sea ports.

Russia of course has different ideas about Georgia and all of the above.  You might argue China and India does too, but so far they haven’t sent any troops into a western friendly country, which wants to be in NATO.  The point being the guest speaker at Pioneer that last week had a point.  Reducing American poultry imports might be a starting point, but Russia has the capacity to both affect and cause trouble in our emerging agricultural supply and demand markets.

Back in southwestern Ontario, this might seem a very long way away.  However, NATO membership means an attack on one member is an attack on another.  Boy, this has the capacity to get messy.  For the last couple of years we’ve all heard about our new agricultural future fostered by countries we never knew.  Little did we know some of them might cause us some trouble.