Food prices should rise with war in Ukraine, says Tereza Cristina

The Minister of Agriculture, Tereza Cristina, said this Wednesday (2) that the government’s expectation is that the price of food will rise, in another consequence of the war in Ukraine.

Russia is one of the main suppliers of fertilizers in the world and the prices of the input are expected to rise due to the logistical difficulties caused by the conflict and the sanctions applied by the United States and allies.

“That’s all [essa alta dos alimentos] It depends. If the war ends today or tomorrow, it’s an impact [aumento de preço menor]. If it continues for longer, it’s another,” said the minister.

According to her, the government’s strategy to avoid high readjustments will be the diversification of fertilizer suppliers.

“It all depends on the weather [de duração da guerra]. We have to reduce these impacts, find alternatives to have the supply. The price [quem faz] it’s the market. Wheat has skyrocketed because Ukraine is a big producer. Today the world is globalized. The price [dos alimentos] we think there will be a rise. Soybeans went up, then went down a little later. The corn rose and then fell. This is a commodity. We have to monitor and reduce the impacts,” she added.

The minister was recently in Iran to deal with the sale of urea. She also travels to Canada in ten days to negotiate contracts for the export of fertilizers based on potash, Brazil’s main deficiency to guarantee the harvest that starts in October.

For the off-season, as the planting of corn in the middle of the year is known, the minister said that producers have fertilizers in stock.

Also according to the head of the folder, importers have in their warehouses the so-called transit stocks (the leftovers from the last harvest and the inputs that still need to be unloaded). Specialists estimate that this stock is in the order of 7 million tons.

Sought this Wednesday, Anda (National Association for the Diffusion of Fertilizers) did not respond.

In recent years, several factors have started to signal a shortage in the supply of fertilizers — with an impact on prices —, such as the recovery of the US and Chinese economies after the retraction of the pandemic; a Chinese energy crisis and the lack of containers in the maritime transport market.

It also impacted the sanctions package applied against Belarus – another important supplier – by the European Union since the end of 2020. The bloc accuses the country’s leader, Aleksandr Lukashenko, of having rigged the last presidential elections.

Last year, Russian fertilizers represented around 22% of the total imported by Brazil. In the case of potassium inputs, Russia is the world’s second largest producer.

With the outbreak of war in Ukraine, the tendency is that the situation will worsen and that it will be more difficult to access fertilizers on the international market.

The main concern is with inputs made from potash, since international production is concentrated in Russia, Belarus and Canada.

With the imposition of sanctions against Russia and Belarus by the United States and allies, the search for the product in these countries is hampered and more expensive.

Some international carriers have already announced the suspension of orders for Russian cargo.

In addition, the punishments against the country’s banking system can make it difficult to buy and sell the products — as well as the conclusion of insurance contracts.

According to interlocutors, it is unlikely that Russia will be completely unable to sell its fertilizers. The country has its own fleet of freighters that, in theory, can continue to carry out maritime transport.

But experts fear that, even in this scenario, US sanctions could create obstacles for the refueling of these ships at destination – as happened with Iranian vessels that were stopped in Brazil in 2019.

On condition of anonymity, a diplomat claims that sanctions do not impede international trade, but inevitably make it more expensive.

Given this scenario, the Ministry of Agriculture has been adopting measures to try to diversify fertilizer suppliers to the country.

During Tereza’s trip to Iran, the minister received the assessment that it was possible to increase sales to Brazil only of nitrogen fertilizers (urea).

On the other hand, experts say that Brazil’s main difficulty will be ensuring access to fertilizers made from potash, a much more concentrated market.

Furthermore, even the expansion of Iranian sales depends on logistics. The establishment of regular lines of transport, for example, still awaits guarantees from the Bolsonaro government that ships from the Persian country will not run out of support and fuel in Brazilian ports, also due to US sanctions.

Another action prepared by Planalto is the launch of a national fertilizer plan.

The project has two pillars: reducing dependence on the international market and creating mechanisms so that there is no excessive variation in prices for the national consumer.

The elaboration of a long-term strategy is being coordinated by the SAE (Secretariat for Strategic Affairs) since the beginning of 2021, based on the reading that events such as the sanctions against Belarus could affect the country’s supply chain.

“We had to make a national policy to change this dependence on imports. We will not be self-sufficient, but [vamos] change this matrix”, declared Tereza Cristina.

The sanctions against Belarus predate the outbreak of war and culminated, in early February, in the suspension of fertilizer sales from the European country to Brazil.

“On February 1, 2022, due to political games, the government of the small country of Lithuania, our neighbor with 2.7 million inhabitants, banned the transit of Belarusian potassium fertilizers for spurious reasons through the sea port of Klaipeda,” he said. Belarus Ambassador to Brazil Sergey Lukashevich

“US restrictions on Belarusian potash have nothing to do with the current situation in Ukraine, it’s a long story: it’s the result of pressure on Belarus after the election in our country in August 2020.”

According to interlocutors, there are no expectations of the resumption of Belarusian potash supplies for at least the next 12 months.