Fertilizer shortages have increased in Russia

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There is a shortage of fertilizers in Russia. This is due to the fact that after the closure of the Strait of Hormuz and the abolition of export duties in the country, the demand for domestic products increased. In general, the increase in prices for fertilizers since the beginning of the year has already exceeded 30%.

Representatives of the agricultural business turned to the head of the Ministry of Agriculture of the Russian Federation, Oksana Lut, pointing out the impossibility of purchasing the materials necessary for sowing due to their shortage and high prices, Izvestia reports .

“The price of fertilizers on the domestic market has risen sharply and reached a record level, and shortages have begun to be observed for many items,” says the letter, which was signed by the head of the People’s Farmer Association of Agricultural Producers, Oleg Sirota.

In the letter, Sirota notes that the key reason for the increase in prices for fertilizers is the abolition of export duties for fertilizer producers from January 1, 2025. Tariffs have been in effect since 2023 and protected the domestic Russian market from rising prices.

Russian farmers demanded to limit the export of mineral fertilizers, as well as to take measures aimed at stabilizing and reducing prices.

The press service of the Ministry of Agriculture told Izvestia that the department, together with the Ministry of Industry and Trade, the Russian Association of Fertilizer Manufacturers and the Federal Antimonopoly Service, keeps the situation with prices for mineral fertilizers under special control.

Possible solution

On March 24, the Ministry of Agriculture announced that it was stopping the export of ammonium nitrate from March 21 to April 21 “to ensure spring field work.” According to the department, this will be able to “provide farmers with a priority type of fertilizer during the sowing period.”

The Ministry of Agriculture also noted that the current set of support measures “ensures a stable market situation and full availability of fertilizers.”

Expert commentary

An economist who wished to remain anonymous told DOXA that due to rising prices for fertilizers, food prices should not rise by the same percentage:

“The retail price also includes logistics, processing, packaging, trade margins and administrative restrictions. But in the coming months, this will almost certainly increase inflationary pressure in crop production, and then in the food chain, especially for crops where the role of mineral nutrition is higher.”

Answering the question about whether it is possible to talk about the failure of market regulation and what instruments, the expert explains that the combination of “zero duty plus quota” was not enough to protect the domestic market in the current period, but the state has ways to resolve this situation:

“The state can return or reconfigure the export duty, introduce stricter quotas, direct marginal prices or price corridors for the domestic market, priority licensing of supplies to farmers, as well as targeted subsidies to agricultural producers.”

Overall, according to the economist, in the short term, a ban on fertilizer exports could temporarily alleviate particularly acute shortages during the peak season. At the same time, if this ban lasts longer, costs may arise:

“The predictability of the export regime is deteriorating, the risks to foreign exchange earnings and tax revenues are growing, and the incentive for fertilizer producers to maintain long-term export contracts and investment plans is decreasing. Therefore, a ban may work as a short-term stabilization, but as a permanent model it is bad in that it treats the symptom and not the cause.”

The reason is that the Russian market is too strongly tied to exports, and the mechanism of mandatory priority supply of domestic demand is not strict enough in the current conditions.