The Russian invasion of Ukraine is being felt as far away as U.S. farm fields
JUANA SUMMERS, HOST:
The economic effects of Russia's invasion of Ukraine are being felt all over the world, including in American farm fields. Sanctions against Russia have led to skyrocketing prices for several different kinds of fertilizers critical to growing crops. As St. Louis Public Radio's Jonathan Ahl reports, the timing could not be worse for farmers.
JONATHAN AHL, BYLINE: Mark Scott is in the barn on his farm about 40 miles outside of St. Louis on this blustery March morning. He's trying to get an old John Deere tractor running for a neighbor of his. It's not going well.
MARK SCOTT: I had it running yesterday.
(SOUNDBITE OF TRACTOR ENGINE REVVING)
SCOTT: That ain't going to work.
AHL: Things not going well is in the DNA of farming. Machines breaking down, weather and volatile crop prices contribute to making it a tough way to earn a living. The Russian invasion of Ukraine and the subsequent sanctions are hitting Scott and other farmers in a new way. Russia is a big exporter of fertilizer and its raw materials. The country's exports account for 18% of the world's potash market, 20% of ammonia sales and 15% of urea. Plus, a lot of the natural gas that is the most expensive part of making nitrogen fertilizers comes from Russia. And while the U.S. doesn't buy much fertilizer directly from Russia, other countries that do are now shopping among America's suppliers, and Scott says the prices are the highest he has ever seen in his 31 years of farming.
SCOTT: It's doubled in price than last year, so I locked up all my nitrogen this morning before it took another jump, and it's probably 38 to 40% higher than last year. So...
AHL: Even before sanctions, fertilizer prices were already high because of supply chain problems and natural disasters shutting down some big plants. Mark Scott says the war's impact makes it a double whammy for farmers and highlights a new financial risk.
SCOTT: We may be at a loss this year versus last year just due to the high input prices.
PAT WESTHOFF: We always see shifts in prices for lots and lots of reasons, but this has been incredibly dramatic in a very short period of time.
AHL: That's Pat Westhoff, an agricultural economics professor at the University of Missouri. He says the situation is bad. Just how bad depends on each individual farmers' timing. That's because farmers typically sign contracts to buy so-called inputs like fertilizer and seeds for the price they are today. They also do the same with crops they grow, agreeing to a sale price now before seeds are even in the ground. Westhoff says that increases the risk.
WESTHOFF: If you forward contracted your grain a while ago at much lower prices than we have now but didn't arrange for your fertilizer supplies, then you could be in very deep trouble right now.
AHL: Westhoff says the good news, if there is any, is that wheat, corn and soybean prices are also way up because of sanctions against Russia and the uncertainty of Ukraine's production and its inability to export. Randy Throener is with BKD, an accounting firm that works with farmers. He says while rising grain and fertilizer prices may seem to offset each other for now, that could change.
RANDY THROENER: But typically right now, those same markets are having an impact on the grain side, too. So right now they're working together. They don't always work together, and that's the risk that comes this spring and this summer.
AHL: Throener says a deep drop in grain prices with fertilizer costs skyrocketing could be disastrous. Farmers like Mark Scott say even if he gets better prices for corn and soybeans, it may not cover soaring fertilizer costs.
SCOTT: Basically, all the farmers are going to do is pay us that money through. We're not going to keep any of it because our inputs have increased probably at a higher percentage than the actual grain prices.
AHL: Farmers say you have to be an optimist in this business, and every season they have to make decisions with limited information. And this year is no different, even if the cause is a war in Europe. For NPR News, I'm Jonathan Ahl in St. Louis.
(SOUNDBITE OF LITTLE COMETS SONG, "JENNIFER") Transcript provided by NPR, Copyright NPR.