The EU is expected to deliver another shock to its agricultural sector by capping Russian imports of potash, a crucial ingredient for growing food, according to Bloomberg, citing a Dow Jones report.
The European Commission is expected to imminently unveil broad new sanctions on Russia. Much of the fertilizer is purchased from Belarus; the landlocked country in Eastern Europe could also be slapped with new sanctions for its involvement in Russia's invasion of Ukraine.
Potash is a key ingredient for agricultural fertilizers. Europe produces only a negligible amount of the fertilizer, and to potentially cap imports from Russia and or Belarus (top producers) seems idiotic for Europe as the spring planting season is only beginning.
Even if Europe were to rework its supply chains to import potash elsewhere, only a few other countries would export it. The impact of capping imports will send prices even higher and create fertilizer shortages for crops. This can dramatically affect crop harvests at the end of the growing season.
A handful of North American fertilizer stocks jumped on the report, including CF Industries +3% and Intrepid Potash 2%.
About 90% of potash is used as fertilizer in Europe; the rest is used to produce table salt, help slow the aging of wine, preserve canned food, and give chocolate its aroma.
Global spot prices for potash show prices continue to accelerate to the upside. This may discourage farmers from purchasing or even spread less of it during the planting season.
Even before the invasion of Ukraine, all fertilizer production in the West was declining (read: here) due to high natural gas prices. The shortage of fertilizers, not just potash, but also nitrogen and phosphates, on global markets, is inevitable. What Europe is doing to potentially cap potash imports from Russia and Belarus is idiotic and can spark a food crisis.
European Union will place a cap on the import of potash.— zerohedge (@zerohedge) April 5, 2022
Is Europe feeling ok? Does it really want a food crisis?