Record fertiliser prices seen pushing higher still on Russia-Ukraine conflict

Fertiliser prices look likely to push higher as a result of the Russia-Ukraine war. Photo / File

Russia's invasion of Ukraine has seen world fertiliser prices push higher from already elevated levels.

Farm lending specialist Rabobank said New Zealand producers were likely to feel the secondary effects of the conflict in the form of increased costs from energy, fertiliser and feed.

The bank said world fertiliser prices are likely to remain at record levels for the coming months.

"Russia's invasion of Ukraine has put a major dent in the likelihood of local urea prices significantly declining ahead of the autumn and spring application period.

"We now expect global urea prices will increase again to levels just below the November peak for the next couple of months, before tapering once again by mid-year," the bank said.

Russia is a major exporter of fertilisers, especially of ammonium nitrate (46 per cent of global exports), ammonia (23 per cent), urea (15 per cent) and mono-ammonium phosphate (14 per cent).

With the addition of Belarus, a total of 40 per cent of global muriate of potash exports comes from the region.

Fertiliser prices were already high as countries sought to ramp up their food production in the wake of Covid-19.

Ravensdown general manager supply chain Mike Whitty said it was early days "but we have seen all the indicators increase right across the board".

"Russia is a big phosphate producer so we have seen a big spike in pricing," he told the Herald.

For the moment, Northern Hemisphere agriculture producers looked likely to bear brunt of higher prices as they head into their spring.

"The key thing from our point of view is that we have already taken care of our autumn season - largely - so it will not have much of a short-term impact on us.

"We are looking out further to the mid-winter and spring - these sorts of timeframes - when the picture will become clearer."

Prices can vary from country to country, depending on the season.

"The key issue here is how long can this go on for," he said, adding European producers may be forced to go further afield to source fertilisers.

New Zealand gets its fertiliser from North America, Asia, North Africa and the Middle East, with some specialised product coming from Europe.

Ravensdown, a farmers' co-operative, capped its prices in December, which will last through to May.

But Whitty said local producers will eventually get hit if prices stay high.

"It is like the oil market in the end," he said.

"We are a price taker and if supply is constrained, then prices will go up unless there is a significant drop in demand.

"Most of our product has arrived in the country for autumn and we have got vessels on the water," he said.

"But what happens in four or five months' time is anyone's guess."