The suspension of the Black Sea Grain Initiative (BSGI) on 17 July and the recent attacks on grain handling facilities in Ukraine put new strain on global agricultural markets. Beyond the widely commented impacts for grain markets, it is equally important to assess potential repercussions for fertilizers. Could we see a repeat of the situation in spring 2022 when fertilizer prices climbed to record highs and threatened global food security?

The BSGI was established in July 2022 to allow for commercial food and fertilizers exports from three key Ukrainian ports. While the Initiative helped restore agricultural flows, official data show that fertilizer exports through those ports did not materialize. Vessel owners and traders evidently avoided the area because of added constraints and higher risks. In this sense, the suspension of the BSGI is not expected to have any immediate impact for fertilizer markets.

Linked to the BSGI, an agreement was set to also facilitate the export of Russian food and fertilizers. The Russian Federation was the world’s largest exporter of ammonia in 2021 but its exports have taken a severe hit since the war broke out in Ukraine. The major Toyatti-Odessa ammonia pipeline, which connected Russian manufacturers to the Black Sea, was first idled and then damaged. Although other exporters managed to close the supply gap and global demand dropped, the ammonia market will arguably remain particularly sensitive to shocks as the suspension of the BSGI delays any prospect of restoring Russian exports.

The situation is different for other fertilizers. Russian exports of urea and phosphates actually accelerated in 2022/2023 as exporters shifted logistics through domestic ports on the Baltic Sea, with historically high international prices covering for the additional transportation costs. Potash exports also continued, although at a slower pace due to challenges for rail shipments and lower global potash demand. However, the Russian Federation will likely maintain its high share of the global potash trade.

The end of the BSGI confirms that fertilizer exports out of the Black Sea will not return to their past “normal” anytime soon. But global trade has had time to adjust since the outbreak of the war and can be expected to continue ensuring sufficient supplies, in the absence of other shocks. Indeed, fertilizer prices showed little reaction to recent developments and continued an upward trend that had already started in June after several months of price declines. The next big round of purchases is still months away, and over the last year market players have developed new logistical and political options to pick from. Yet, fertilizer markets will continue keeping a close eye on Black Sea developments.