Russia plans to impose a six-month quota on some fertilizer exports to safeguard local supplies and limit costs for farmers after the energy crisis sent nitrogen nutrient prices soaring.
The move -- covering exports of nitrogen and complex fertilizers containing nitrogen -- comes as nutrients prices have surged globally as soaring gas prices boost production costs and force some plants to cut production. That risks curbing harvests in the year ahead and accelerating food inflation.
Russia's decision was announced by Prime Minister Mikhail Mishustin during a televised government meeting on Wednesday, after President Vladimir Putin urged measures to ensure supplies for local farmers. It's the latest move by the country to keep local agricultural prices in check, after taxes on wheat exports were introduced this year. Russian fertilizer producers shares fell.
The government will limit nitrogen fertilizer exports to 5.9 million tons and shipments of complex fertilizers containing nitrogen to 5.35 million tons. The measures will kick in at the start of December, Interfax reported.
The quotas will mainly impact nitrogen fertilizer exports, cutting shipments by about 40%, said Elena Sakhnova, an analyst at VTB Capital. The measures won't affect complex fertilizer sales much because the quota is roughly in line with how much Russia exports, she said.
"A lot will depend on how the quota on nitrogen fertilizers is split between the types of nutrients," Sakhnova said. Russian farmers mostly use ammonium for spring planting, while urea is the main nitrogen fertilizer type in Europe, so growers there may face higher prices, she said.
Shares of fertilizer producers PhosAgro PJSC dropped as much as 4.2% in Moscow after Mishustin's speech, while Acron PJSC declined as much as 7.2%, before both stocks pared some of the losses.
European farmers have already voiced concern about securing fertilizer supplies for the spring, when they're applied to grain fields to boost yields and quality. French farm groups said last month nitrogen prices have tripled and there's a risk of shortages to come. China has also curbed exports to ensure enough domestic supply.
"A Russian export quota will tighten further global markets already scrambling for supply," said Alexis Maxwell, an analyst at Green Markets, a business owned by Bloomberg. "Russia's close proximity to the U.S. has meant it is a growing nitrogen supplier to the U.S."
An index of North American fertilizer prices hit a record last month, and ammonia prices in western Europe are at the highest in more than a decade, Green Markets data show.
Russia's fertilizer makers have largely benefited as the energy crunch tightens nutrient supplies, because their gas prices are fixed, unlike some rival supplies elsewhere. Russian producers last month extended a freeze on prices for domestic clients until year-end.
While farmers are already buying some nutrients for winter sowing, it can be dangerous to stockpile large amounts of nitrogen types -- the main fertilizer for spring planting.