https://oilprice.com-By Cyril Widdershoven
- Last summer, the president of Belarus shocked the world when he grounded an international flight to detain a journalist and, as a result, was sanctioned by the U.S.
- Now, those sanctions are causing Biden a major headache as the lack of Belarussian potash is causing a massive price spike for fertilizers
- Farmers are calling on the Biden administration to lift potash sanctions in order to avoid a major spike in food prices, a problem that would only add to inflation fears
Rocketing fertilizer prices are causing severe unrest in the American agriculture sector, with the Biden administration facing a sharp rebuke from industry leaders. The Agricultural Retailers Association, American Farm Bureau Federation, American Soybean Association, National Association of Wheat Growers, and National Corn Growers Association, the gang of five, have signed a letter condemning US sanctions on Belarussian potassium chloride (potash) for creating an almighty price spike. The letter goes on to explain that potash is a critical input for crop production, with 63% of US corn acres, 48% of its cotton acres, and 19% of its wheat acres requiring potash-based fertilizers.
As a result, it is feared that shortages will lead to less successful harvests, cutting away at farmers’ margins and pushing up food prices for American consumers. The gang of five, as representatives of US agriculture, have called on the government to ease price pressures by removing sanctions on Belarussian potash immediately. In a nod to the gravity of the situation, recent media coverage has confirmed fears that the current crisis may cause sustained price instability.
A recent report by the Wall Street Journal (WSJ), for example, highlighted that sky-high fertilizer costs will likely lead to them being used less, resulting in smaller harvests in the future. Low yields would then feed through into higher costs not only for grain-based products such as bread and cereal but also ramping up the feed costs for livestock and poultry. American meat-eaters will certainly be displeased when the price of steak and fried chicken starts to tick up. Sensing the danger, insiders from the fertilizer industry have also raised the alarm over the current shortages of potash.
Svein Tore Holsether, the CEO of Yara International ASA, one of the world’s largest fertilizer producers, recently cast a light on the impact of US sanctions on Belarus on the market.
‘Belarus represents 20% of the global production of potash so clearly they are a significant supplier. If that part [potash] doesn’t make it out of Belarus, then I don’t see anyone ready to turn up the volumes’.
The importance of Belarussian potash to global agriculture, therefore, suggests that the struggles of US farmers look set to persist. Yet if its potash is so important, why is tiny Belarus under sanctions in the first place?
Going back to this summer, the country’s President Alexander Lukashenko attracted global media attention after his forced grounding of a Ryanair flight carrying Roman Protasevich, a journalist. This was the flashpoint that led to Belarus’ sanctioning by the US and his antics have not gone unrecognised by the American agricultural sector. Indeed, in their aforementioned letter to the US government, the gang of five emphasize that they ‘support efforts to hold the Belarussian Government accountable for violations of international norms’.
However, the letter also repeats the argument that the current restrictions on Belarussian potash exports to the US are ‘harming farmers and affording a competitive advantage to farmers in the UK and EU’.
The Biden administration, therefore, is seemingly balancing what it views to be its obligations to Belarus with the interests of American farmers and consumers. To find a way through this impasse, influential voices in the foreign policy community have recommended an American détente with Belarus. Their argument goes that the US could end Belarus’ economic isolation in return for Lukashenko guaranteeing democratic and humanitarian reforms at home.
If this were to be achieved, then exports from the world’s largest potash producer could recommence, lifting the price pressure off American farmers and consumers. Belarussians would also see their living standards increase as their economy reconnected with global markets and the social fabric of their lives would be rethreaded under a new reformist agenda. This is clearly the wish of the US agricultural sector, but would such a détente have the support of the American electorate?
In one sense, it’s difficult to say as the sanctioning of Belarus is not a hot-button political issue in the US, but there is certainly growing concern about fast-rising prices. In a recent poll, 65% of Americans said that they thought that the government was not doing enough to combat inflation and President Biden’s ratings have slumped as a result. With the WSJ noting that high fertilizer prices are likely to feed through into higher prices for basic foodstuffs, and with Americans so concerned about inflation, then sanctions on Belarus seem to be against the wishes of the electorate. Perhaps the current sanctions policy is a result of President Biden being distracted from the Belarussian issue as he faces down Russian aggression towards Ukraine. However, discontent over price inflation could easily mark the undoing of his Presidency and the withdrawal of sanctions on Belarus is an easy route to making that particular problem go away.
By Cyril Widdershoven for Oilprice.com