Thursday, 19 January 2017

Has Ukraine inadvertently engineered a fertiliser shortage?

Here’s an interesting one; Ukraine is currently debating whether to impose or delay the introduction of anti-dumping duties on Russian urea and urea-ammonium nitrate (UAN) until after parliament passes a bill concerning zero nitrogen fertiliser duties for other countries.

Arguably it would make sense for Ukraine to try and protect its domestic fertiliser industry from its neighbour dumping cheap imports by imposing duties and making them less competitive.

However Ukraine’s Ministry of Agricultural recognises that it may be necessary to suspend anti-dumping duties on Russian imports until after the Verkhovna Rada approves the bill to avoid possible negative consequences for agriculture; which I take to mean a shortage of fertiliser for the coming season.

The scenario being that Ukraine impose duties on Russian imports which reduces the supply before freeing up a replacement supply from elsewhere by passing the zero duties for other countries bill.

The anti-dumping duties on imports of urea and UAN from Russia are set to be introduced in February for a period of five years and the zero duties bill was endorsed by the government committee and sent to central executive agencies for approval which I have no idea how long takes to be ratified.

But it seems entirely possible that Ukraine could shoot itself square in the foot by engineering a shortage of fertiliser for the coming season that would impact negatively on the 2017 crop yield.

Worth keeping a close eye on this story.