the shopping basket
If, on the least expected day, someone from the RAE called me asking for a precise definition of a war, my answer would be clear: an armed conflict between two or more countries that inevitably ends up raising the price of our supermarket basket. And what is happening north (and south) of the Strait of Hormuz was not going to be an exception. Almost perfect timing. Since the United States and Israel launched their attacks on Iran on February 28, the situation has gotten out of control on many fronts. And it is not only that the transit of diesel through the strait has been virtually closed, but also; is that, although many people do not know it, a third of the world’s urea passes through this sea route (and, in fact, much of it is manufactured in the liquefaction plants that have been attacked these days). That is to say, a good part of the international stock of nitrogen fertilizers has been compromised just at the moment when the northern hemisphere begins its planting campaign. And what has happened? That, accordingly, the price has passed from 400 dollars a ton to more than 600 in a week. In fact, the North American index it reached 810 dollars. We already know this story. In 2022, after the invasion of Ukraine, we experienced a very similar shock. Russia accounted for around 16% of urea exports and around 12% of phosphates. What’s more, together with Belarus, produced almost 40% of the potassium of the international market. The situation got out of control and prices skyrocketed. The problem is that in 2022, the problem was sanctions and (many times under rope) the market was able to redirect itself and the logistics chains cushioned the blow a bit. Right now and without an alternative way to get urea out of the Gulf, there is no valid plan B. The blow is going to be harder every day that the strait is closed. And why does it affect us? Spain is the second largest fertilizer market in the Union and more than 1.9 billion is spent on it every year. Almost all of that money, by the way, is dedicated to imports because manufacturing it is unviable and, consequently, there is no infrastructure either. To the extent that natural gas represents between 70 and 90% of the variable cost of fertilizer production, the price of food is going to rise (and, if the example of 2022 is anything to go by, it is going to do so very quickly). What will it affect the most? Bread, pasta and cereals (it is one of the crops most sensitive to the price of fertilizers); meat, dairy and eggs (due to their dependence on corn for feed); vegetable oils (because many are also used to make biofuels); and fruits and vegetables (because everything under greenhouses is critically dependent on fertilizers). What can we expect? If the conflict lasts a couple of weeks or a month, the impact will be limited because there is accumulated stock and the urea will arrive in time to be produced. There will be losses and higher prices, but the problem will be less. If we talk about a few months, global food inflation will be noticeable and we would be in a scenario similar to 2022. If the stock out lasts until after the summer, we would enter unknown territory. Be prepared in an increasingly volatile world. And if we think about it calmly, we will realize that there are no strategic reserves of fertilizers and building new plants would take years. The costs of cultivating the Earth have doubled in the last decade and everything seems to indicate that, if we don’t do something, the situation can only get worse. Image | Left Victorian In Xataka | Working the land is becoming more expensive: Agricultural costs have doubled in the last ten years
