Ukraine invasion: China braces for effects of global fertiliser shortage on food security
A protracted war between Russia and Ukraine could damage the global fertiliser supply chain, putting pressure on grain prices and production in China during a key planting season.
The UN Food and Agriculture Organization has warned of a possible worldwide food crisis, as the war in Ukraine threatens production of key staple crops. Russia and Ukraine represent more than half of the world's supply of sunflower oil and about 30 per cent of the world's wheat.
China is largely self-sufficient in staple crops like wheat and rice, but the war is also driving up fertiliser prices.
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More than a half of the potash - a key nutrient for major commodity crops - that China consumes each year is imported, while customs data show that nearly 53 per cent of potassium purchases last year came from Russia and Belarus, the largest and third largest suppliers to China, respectively.
Moscow earlier this month recommended suspending fertiliser exports, while Lithuania and Ukraine have already banned transit of Belarusian potash through their ports. Ukraine, a major producer of agricultural products, also banned exports of fertilisers on Saturday.
"This will definitely have some impact [on food security]," said Xu Hongcai, deputy director of the economic policy commission under the China Association of Policy Science.
"If the trade of fertilisers and grain is interrupted, how can we do spring fieldwork? How can we hold the rice bowls of our 1.4 billion population in our own hands? There will be a lot of trouble."
The Farmers' Daily, an official newspaper affiliated with the Chinese agriculture ministry, warned the war has fuelled a spike in fertiliser prices, which are pushing up planting costs and eating into farmers' incomes.
"The global situation is complex, the supply of fertilisers is tight, and especially around the import of potash there is greater uncertainty," the newspaper said in an article published on Wednesday.
The article said the war has fuelled a spike in fertiliser prices, which are pushing up planting costs and eating into farmers' incomes.
The heightened concerns come as China's leadership ramps up rhetoric around safeguarding food security, which has been put under pressure by the coronavirus pandemic and tensions with the West.
The importance of self-reliance in primary commodities, including grains and fertilisers, was again highlighted in the annual government work report this year.
Around 57.5 per cent of the country's potash consumption relied on imports in 2021, a higher ratio than the 55.9 per cent figure a year earlier, but below the 59.8 per cent recorded in 2019, according to BAIINFO, a supplier of Chinese commodity market information.
In July 2020, the Chinese government integrated the country's fertiliser reserves system to ensure domestic potash supply and reduce the impact of disasters.
The country has begun to release over 3 million tonnes of reserved nitrogen, phosphorus and compound fertilisers to help spring ploughing, according to the National Development and Reform Commission on Monday.
Last year, it restricted exports of fertilisers and excluded fertiliser producers from the list of high energy-consuming companies.
In volume terms, China's fertiliser exports fell by 27.8 per cent in the first two months of this year, customs data showed. Fertiliser imports also dropped by 2.2 per cent, but rose by 60.1 per cent in US dollar terms, suggesting the impact of higher prices.
International potash prices began to surge in 2021 when Western sanctions on Belarus affected its potash exports. Since the military conflict and subsequent bans, global potash prices have continued to soar.
The domestic spot price in China hit a record high of 4,930 yuan (US$770) per tonne on Wednesday, more than double the price a year ago, according to the financial information services provider Wind.
"Driven by higher production costs led by the rising prices of crude and fertilisers, the prices of China's agricultural products such as corn and wheat have greater upwards pressure," analysts at China International Capital Corporation said last week.
In a meeting on Monday, the State Council, China's cabinet, said this year it would be closely following commodity market movement and the impact on the Chinese economy.
"Grain prices are the basis of all prices ...[this year we will] ensure the supply and price stability of agricultural materials such as fertilisers," Liu Rihong, an official with the Research Office of the State Council, said Friday.
This article originally appeared on the South China Morning Post (SCMP).
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