Vice Prime Minister Victoria Abramchenko put an end to a months-long dispute between fertilizer producers and farmers over prices. If in the spring chemists were able to prove to the government that there were no compelling reasons for fixing the cost of their products, now they agreed to freeze prices and give a discount of up to 5% amid the weakening of the ruble and the upcoming new rise in the price of fertilizers on the global market. Farmers themselves believe that fixing prices at peak levels is useless, but, according to market participants, they are unlikely to be able to get any other measures from the government.
Russian chemical companies will freeze fertilizer prices for farmers at the current level until October 31, and will also provide them with a 5% discount. Such decisions were made following a meeting with Deputy Prime Minister Victoria Abramchenko. The Ministry of Agriculture, the Ministry of Economy, the Ministry of Industry and Trade and the Federal Antimonopoly Service, together with business, should determine the final parameters of voluntary price fixing for specific consumption volumes in the current season within a week.
As the Ministry of Industry and Trade explained to Kommersant, the freezing of prices will allow Russian agricultural producers to make the necessary purchases of fertilizers for the harvest of 2022, given that the sowing of winter crops will begin in less than a month. The Russian Association of Fertilizer Producers (RAPU) confirmed their readiness to freeze prices until the end of the sowing season.
In addition to short-term measures, ministries and companies should offer long-term mechanisms to maintain the availability of fertilizers, Victoria Abramchenko stressed. In particular, already this year, a methodology for forecasting prices based on the world market situation and assessing the sufficiency of supplies to the domestic market, developed on behalf of First Deputy Prime Minister Andrei Belousov, should be introduced. This system will affect not only the chemical sector, but also metallurgy, as well as the food segment.
Disputes between farmers and chemists began in winter, on the eve of the start of the spring sowing campaign. Even then, agricultural producers began to talk about a sharp increase in the cost of mineral fertilizers and demanded that the Ministry of Agriculture introduce price regulation in the industry – up to the introduction of export duties. But at that time the government did not see any grounds for this, and only Uralchem announced a voluntary price freeze, which in the summer, together with Uralkali, was also the first to fix the cost of certain types of its products.
The rest of the companies in the spring did not begin to fix domestic prices, indicating that they are already significantly lower than world prices against the background of a multiple increase in the cost of agricultural products. The head of the board of directors of Akron, Alexander Popov, said on July 16 that the cost of mineral fertilizers in Russia is now 30-40% lower than in world markets, and almost half that for agricultural producers in other countries. Rosstat estimates the current difference between Russian and global prices at 25% for phosphate fertilizers.
But, explains a Kommersant source familiar with the situation, this time chemists supported price fixing due to the dramatically changed macroeconomic situation and taking into account natural disasters in several regions of the Russian Federation. According to the interlocutor of Kommersant, in recent weeks, the dollar has strengthened significantly, and the world situation has improved.
According to Argus, the cost of phosphate fertilizers, which are the main ones during the fall sowing season, will increase in August versus July by $ 5–20 per tonne on different bases. So, for example, DAP on FOB Morocco will reach $ 761 per ton, and MAP on CFR Brazil – $ 800 per ton. The agency notes that prices will be supported by strong demand in the main large markets. Chemical players explain that August is the traditional peak of import demand for phosphate fertilizers in Latin America, low stocks and shortages in India remain, and there is a decrease in supplies to the world market from China.
At the same time, the farmers themselves are not satisfied with the decision to fix prices for fertilizers. Sources of Kommersant among agricultural producers note that they are now at their peak since the beginning of the year, so freezing them will in no way solve the problem of purchasing the required volumes. The situation is especially difficult, according to them, for small farms, which even an additional 5% discount “will not save”. But, according to one of Kommersant’s sources, after the decision to fix it was made at the level of the Deputy Prime Minister, farmers are unlikely to succeed in taking additional measures to reduce fertilizer prices.