The crisis in Ukraine will shock the global food supply and cost, according to the CEO of one of the world’s largest fertiliser firms.
Yara International, which has operations in over 60 countries, imports a significant amount of key raw materials from Russia.
Due to rising wholesale gas costs, fertilizer prices were already high.
Svein Tore Holsether, Yara’s leader, has warned that the situation might worsen.
“Every hour, things change,” he told reporters.
“We were already in a terrible situation before the conflict… now there’s extra interruption to supply lines, and we’re approaching the most vital portion of this season for the Northern hemisphere, where a lot of fertiliser has to go on, and that will almost certainly be disrupted.”
Russia and Ukraine are two of the world’s largest agricultural and food producers.
Russia also generates massive amounts of minerals such as potash and phosphate, which are important elements in fertilizers that help plants and crops thrive.
“Fertilisers provide food to half of the world’s population… and if they are withdrawn from the field for particular crops, [the production] would drop by half,” Mr Holsether added.
“For me, the question isn’t if we’ll enter a global food crisis; it’s how big the crisis will be.”
After a rocket damaged Yara’s office in Kyiv, his firm has already been impacted by the violence. The 11 members of the staff were uninjured.
The sanctions on Russia haven’t directly impacted the Norwegian firm, but it is dealing with the consequences. Due to the shipping industry’s upheaval, securing supplies has grown increasingly challenging.
The Russian government encouraged its manufacturers to suspend fertiliser exports just hours after Mr Holsether talked to reporters.
He pointed out that Russia supplies around a quarter of the critical nutrients required in European food production.
“At the same time, we’re doing everything we can right now to obtain extra resources. However, due to the tight deadlines, it is constrained “Before the news broke, he stated.
Farmers would face greater expenses and reduced agricultural yields as a result of the decision, according to analysts. Food prices might rise much more as a result of this.
Nutrients aren’t the only thing to think about.
The production of ammonia, a fundamental element in nitrogen fertilizers, necessitates a large volume of natural gas. For its European factories, Yara International relies on large amounts of Russian gas.
Due to a surge in wholesale gas prices last year, it was obliged to temporarily halt output of nearly 40% of its capacity in Europe. Other manufacturers have likewise reduced their output.
When this was combined with increasing shipping charges, sanctions against Belarus (another key potash supplier), and unusual weather, fertiliser prices skyrocketed last year, leading to a spike in food prices.
The firm says it is evaluating how to sustain supplies on a day-to-day basis and that it is too early to determine whether further shutdowns are in the works.
It agrees that it has a “very strong commitment” to keep production going at a “critical time.”
However, Yara’s chairman believes that the world’s reliance on Russia for global food supply must be reduced in the long run.
“On the one side, we’re attempting to maintain fertiliser supply to farmers in order to maintain agricultural production.
“At the same time… a forceful reaction is required.” We oppose Russia’s military invasion of Ukraine, therefore we’re in a pickle, and it’s a difficult one.”
Before the epidemic, climate change and rising populations had already added to the issues facing the global food supply system.
The battle, according to the CEO of Yara International, is “a tragedy on top of a catastrophe,” illustrating how sensitive the global food supply system is now to shocks.
He goes on to say that it will exacerbate food insecurity in impoverished nations.
“We must keep in mind that there has been an increase of 100 million people going to bed hungry in the previous two years… so adding this on top of it is really concerning.”