Tariffs for certain nitrogen-based fertilizers will rise over three years from 6.5 per cent to an amount equivalent to about 100 per cent, a level that would effectively halt trade. For the farm produce, an additional 50 per cent duty will apply.

Why it matters: Globally, Russia is one of the leading producers and exporters of fertilizer.

The tariff hikes are expected to take effect on July 1.

More than 70 per cent of EU fertilizer consumption in 2023 was of the nitrogen-based product targeted, and Russia accounted for 25 per cent of EU imports, worth about 1.3 billion euros ($1.5 billion).

Kremlin spokesman Dmitry Peskov said in reaction that if the EU imposed huge tariffs on Russian nitrogen fertilizers, the cost of the fertilizers for the European Union would rise and their quality would fall.

He said demand for Russian nitrogen fertilizers on other export routes remained high, adding that Russian fertilizers were of the highest quality.

Russian and Belarus grain was already hit with prohibitive tariffs last year. The new tariffs apply to the 15 per cent of agriculture imports from Russia not previously subject to duties, worth 380 million euros (C$594.4 million). This includes meat, dairy produce, fruit and vegetables.

The European Commission said these imports, particularly of fertilizers, made the EU vulnerable to potential coercive actions by Russia that could threaten EU food security.

EU imports from Belarus were more limited at 92 million euros for farm produce and 30 million euros for fertilizers in 2023.

The European Commission has said the tariffs will help support domestic production and allow for diversification of supply from elsewhere.

The change to a higher fertilizer tariff includes potential mitigation measures if EU farmers see substantial price increases.

The levies will not affect transit of Russian agricultural and fertilizer exports to third countries. The EU has so far avoided imposing sanctions on them so as not to disturb global supplies, particularly to developing countries.

The European Parliament approved the hikes by 411 votes to 100, with 78 abstentions.

— Reporting by Philip Blenkinsop and Bart Meijer

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The tariffs will be 95 euros ($102.76) per ton for cereals and 50 per cent for oilseeds. Tariffs will also apply to beet-pulp pellets and dried peas. The ministers’ decision follows a proposal from the European Commission on March 22.

The measure quickly drew Russian disapproval.

“The new messages from the EU will yet have to be analysed. But their ideology is clear – they want to squeeze Russia out of everything,” Russian Foreign Ministry spokeswoman Maria Zakharova told reporters at a weekly briefing.

Vincent Van Peteghem, the finance minister of Belgium, which holds the rotating presidency of the EU, said the new tariffs were intended to stop imports of grain from Russia and Belarus into the EU “in practice”.

“These measures will therefore prevent the destabilisation of the EU’s grain market, halt Russian exports of illegally appropriated grain produced in the territories of Ukraine and prevent Russia from using revenues from exports to the EU to fund its war of aggression against Ukraine,” he said.

Russia exported 4.2 million metric tons of cereals, oilseeds and derived products to the EU in 2023, worth 1.3 billion euros ($1.4 billion). This represented about one per cent of the EU market.

The Commission has said there was a risk that imports could increase, given Russian overall wheat exports had risen to 50 million tons from the usual 35 million tons.

EU ministers said the increase in customs duties would not harm global food security as it would not affect the transit of the products through EU territory to third countries.

—Reporting for Reuters by Jan Strupczewski, additional reporting by Dmitry Antonov in Moscow

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The Commission said the tariffs were also designed to limit Russia’s ability to fund its war in Ukraine and to curb its sales of grain stolen from Ukraine.

The EU has expressly avoided imposing sanctions of Russian agricultural produce so as not to disturb global supplies. The Commission said that, with tariffs, transit of grain through the bloc to other countries would still be allowed as would financing, insurance, storage and transport of such shipments.

Traders said earlier this week that Russian and Belarusian shipments to the bloc are low, certainly relative to those from Ukraine, and that the imposition of tariffs was largely symbolic.

Russia exported 4.2 million metric tons of cereals, oilseeds and derived products to the EU in 2023, worth 1.3 billion euros (C$1.9 billion). A Commission official said this represented about on per cent of the EU market.

However, the Commission said there was a risk imports could increase, given Russian overall wheat exports had risen to 50 million tons from the usual 35 million tons.

The tariffs will be 95 euros (C$140) per ton for cereals and 50 per cent for oilseeds. They can be applied after approval from EU governments, which are likely to give assent within a few weeks.

The proposal came as European Union leaders debated the EU response to farmer complaints over environmental rules and the suspension of tariffs on agricultural imports from Ukraine since Russia’s invasion in 2022.

The latter has caused ructions in the bloc. Both France and Poland have criticised a provisional deal reached on Wednesday to extend tariff-free access for a further year with new curbs on some food products.

There is broader agreement on keeping out measures targeting Russia and Belarus.

On Wednesday, agriculture ministers of the Czech Republic, Estonia, Latvia, Lithuania and Poland wrote to the Commission urging it to act.

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Potash prices have been falling after shipments from Belarus and Russia resumed. These exports had been significantly restricted last year following Western sanctions imposed on Russia in response to its invasion of Ukraine.

Demand for fertilizers was also weak during much of the year, analysts have said, as farmers waited for prices to settle down.

Potash prices averaged $250 per tonne during the reported quarter, the company said, compared with $633 per tonne a year earlier (all figures US$).

The company’s U.S.-listed shares fell three per cent after the bell.

Nutrien said potash sales volumes, however, climbed 23 per cent on strong sales in North America.

Fertilizer inventories in the U.S. had been running low which should result in relatively robust demand, BofA Global Research analyst Steve Byrne had said ahead of the earnings.

On an adjusted basis, Nutrien reported earnings of 35 cents per share for the three months ended Sept. 30, compared with the average analyst estimate of 64 cents, according to LSEG data.

Nutrien, the top U.S. agricultural retailer, also narrowed its adjusted earnings forecast for 2023 to a range of $4.15 to $5 per share, compared with a range of $3.85 and $5.60 earlier.

The company forecast fourth-quarter fertilizer demand would be up five to 10 per cent year-on-year.

Nutrien added it was lowering its nitrogen sales volume forecast due to the unplanned outages in the third quarter and pull-forward of a planned maintenance outage at its Borger site in the current quarter.

— Reporting for Reuters by Sourasis Bose in Bangalore.

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U.S.-listed shares of the company fell 3.9 per cent in extended trading Wednesday as it also reported a lower-than-expected quarterly profit.

Though fertilizer prices have dipped from record highs scaled last year, farmers are holding back on purchases on expectations of a further decline.

The Canadian firm’s North America potash sales volume dropped 30 per cent, with prices averaging $401 per tonne during the reported quarter, 41 per cent lower compared with last year (all figures US$).

The company cut its full-year adjusted earnings outlook to between $5.50 per share and $7.50 per share, from $8.45 per share to $10.65 per share forecast earlier.

Analysts on average expect a profit of $8.56 per share.

Nutrien, however, said it anticipates a rise in global potash demand in the second half of 2023 as inventories deplete and affordability for farmers improves.

It also expects potash shipments from Belarus to be higher than its earlier estimates.

Nutrien, which competes with CF Industries and Mosaic Co., said its total quarterly sales fell 20 per cent to $6.1 billion.

On an adjusted basis, the potash producer earned $1.11 per share for the quarter ended March 31, compared with estimates of $1.50, according to Refinitiv data.

Earlier this month, peer Mosaic also missed profit estimates.

— Reporting for Reuters by Sourasis Bose in Bangalore.

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Belarus, used by its ally Russia as a staging ground for Moscow’s Feb. 24 invasion of Ukraine, said in June that it would let Ukrainian grain go via the country to Baltic Sea ports, if Belarus was allowed to ship its goods from the ports as well. Ukraine did not agree to the proposal.

Belarus Deputy Foreign Minister Yury Ambrazevich met with U.N. Secretary-General Antonio Guterres in New York on Friday to tell him that there are no preconditions to the transit of Ukraine grain, U.N. spokesman Stephane Dujarric said.

Ambrazevich also “reiterated the requests from his government to be able export its own fertilizer products, which are currently subject to sanctions,” Dujarric said in a statement after the meeting.

Belarus, a major global potash producer, has been hit by harsh Western sanctions in 2021-22 which disrupted its exports of the fertilizer via the Baltic Sea ports.

In July the United Nations and Turkey brokered a deal with Russia and Ukraine to resume Ukraine’s Black Sea shipments of grain — stalled since the start of the war — and to facilitate Russia’s food and fertilizer shipments.

The United Nations is still working to resume Russian ammonia exports, a key fertilizer ingredient, via a pipeline to a Black Sea port in Ukraine.

The United Nations has said Russia’s war in Ukraine worsened a global food crisis, pushing some 47 million people into “acute hunger” and sparking the need for the July export deal, which was renewed for another 120 days last month.

— Reporting for Reuters by Michelle Nichols and Kanishka Singh.

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A clutch of farmer and ag industry groups on July 15 put forward a new request to Ottawa for compensation to farmers “negatively impacted” by a 35 per cent tariff imposed following Russia’s invasion of Ukraine.

Nearly all imports of goods from Russia and Belarus became subject to a general tariff of 35 per cent on March 2, when Ottawa withdrew both countries’ entitlement to the most-favoured-nation (MFN) treatment under Canada’s Customs Tariff.

That move, the ag industry groups said July 15, was made “without any prior consultation with the agriculture sector” and eastern Canadian farmers were “disproportionately impacted.”

The ag organizations included Grain Farmers of Ontario, the Atlantic Grains Council, Quebec Grain Farmers, Ontario Bean Growers, Ontario Canola Growers and the Christian Farmers Federation of Ontario, as well as Fertilizer Canada, the Ontario Agri Business Association, ag co-operative Sollio Agriculture and input retailer and fertilizer distributor Sylvite Agri-Services.

Ontario, Quebec and Atlantic Canada, they said, rely “heavily” on fertilizer imports including about 660,000 to 680,000 tonnes of Russian nitrogen fertilizer per year, or about 85 to 90 per cent of the total nitrogen fertilizer used in the region.

Nitrogen fertilizers such as ammonia and urea are produced domestically, in Canada’s West, but for years it’s been more cost-effective for growers in the East to access imports from overseas.

The ag groups said July 15 their industry “strongly supports the people of Ukraine and condemns the Russian invasion” as well as sanctions imposed by Canada and its allies, but “action by the Canadian government should not jeopardize Canada’s capacity to produce food today or in the future.”

Canada’s application of the General Tariff made it the only G7 country with tariffs on Russian fertilizer, the groups said.

“Farmers bore the costs of tariffs which has put Canadian farmers at a disadvantage to farmers in other countries who did not have tariffs on fertilizers,” Christian Overbeek, chairman of Quebec Grain Farmers, said in the groups’ joint release. “We need compensation for farmers and concrete solutions for the 2023 planting season in place this summer.”

“An additional tariff paid by farmers on a global product such as fertilizer just penalizes the farmer,” Roy Culberson, chairman of the Atlantic Grains Council, said in the same release. “We look forward to working on a resolution with government.”

Asked during a media scrum Tuesday in Winnipeg about the groups’ requests, federal Agriculture Minister Marie-Claude Bibeau said that while the government has heard the request, it would be supporting Canadian farmers “in other ways.”

For example, she cited the government’s move last month to temporarily raise the interest-free portion of cash advances available under the Advance Payments Program to $250,000, up from the usual $100,000, for 2022 and 2023.

As for direct compensation, though, “we have been looking at it and we’ve made the decision to support farmers in a different way.”

Ottawa will be working with the industry and the various ag associations, she said, “to see how we can find alternative options to access fertilizer for the next season.”

Ontario Bean Growers, in a separate release Wednesday, called on the federal government to “return the fertilizer tariffs entirely, or at least for those purchases made prior to the war” — and also to invest in domestic fertilizer production in the longer term.

“We are also asking for the federal government to examine major trading partners, such as the U.S., to assess the disparity on costs caused by the Canadian regulations,” group chairman Dave Woods said in that release. — Glacier FarmMedia Network

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Potash prices have soared since the West imposed sanctions against Russia for Moscow’s invasion of Ukraine, crimping an already tight fertilizer market.

Russia and Belarus, which also faces sanctions, are the world’s second- and third-largest producers of the crop nutrient, while Canada is the No. 1 producer.

“The world needs these volumes in order to feed people well,” said Ken Seitz, Nutrien’s interim CEO, at a meeting with investors.

Seitz said it will take at least several years to replenish global crop supplies and for Russian and Belarusian potash trading volumes to return to normal levels.

Nutrien’s expansion falls well short of fully replacing the eastern European production. The world is short 10 million tonnes from that region and Nutrien’s extra output of three million tonnes annually by 2025 should be quickly absorbed, said RBC Capital Markets analyst Andrew Wong.

The potash ramp-up will use Nutrien’s existing mines in the province of Saskatchewan.

Wong estimated the expansion’s cost at $300 million to $900 million (all figures US$).

The company said it was advancing previously announced boosts of its nitrogen fertilizer capacity to add 500,000 tonnes annually by the end of 2025, and is considering further expansion.

Nutrien also said it plans to repurchase an additional $2 billion worth of shares.

— Reporting for Reuters by Rithika Krishna in Bangalore and Rod Nickel in Winnipeg.

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Zelenskiy told a news conference in the capital Kyiv that there could be as much as 75 million tonnes of grain stuck in Ukraine this autumn.

Belarus, used by its ally Russia as a staging ground for Moscow’s Feb. 24 invasion, has said it is ready to let Ukrainian grain go via the country to Baltic Sea ports, if Belarus is allowed to ship its goods from the ports as well.

Russian President Vladimir Putin, who says Moscow is carrying out a special military operation in Ukraine, has also touted the idea as a solution.

“We are not yet ready to follow this format and help our ‘friendly’ neighbours,” Zelenskiy was quoted as saying by Interfax Ukraine.

Zelenskiy told reporters that Ukraine had discussed with Britain and Turkey the idea of a navy from a third country guaranteeing safe passage of Ukraine’s grain exports through the Black Sea.

However, he said the strongest guarantee of their safe passage would be with Ukrainian weaponry.

“Our strongest guarantee of unblocking this or that corridor from ports for the export of grain is to respond with weapons that will be located in the region,” he told reporters.

“We are working on this with specific states, with specific anti-ship systems, we are working and are gradually receiving them,” he said.

— Reporting for Reuters by Natalia Zinets; writing by Tom Balmforth and Max Hunder.

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“I am hopeful, but there is still a way to go,” said Guterres, who visited Moscow and Kyiv late last month. “The complex security, economic and financial implications require goodwill on all sides.”

Addressing a food security meeting at the United Nations hosted by U.S. Secretary of State Antony Blinken, Guterres appealed to Russia to allow “the safe and secure export of grain stored in Ukrainian ports” and for Russian food and fertilizers to “have full and unrestricted access to world markets.”

Russia’s war in Ukraine has caused global prices for grains, cooking oils, fuel and fertilizer to soar, and Guterres warned this will worsen food, energy and economic crises in poor countries.

“It threatens to tip tens of millions of people over the edge into food insecurity, followed by malnutrition, mass hunger and famine, in a crisis that could last for years,” Guterres said.

Ukraine used to export most of its goods through seaports but since Russia’s Feb. 24 invasion, it has been forced to export by train or via its small Danube River ports.

U.N. food chief David Beasley appealed to Russian President Vladimir Putin: “If you have any heart at all, please open these ports.” Beasley heads the World Food Programme, which feeds some 125 million people and buys 50 per cent of its grain from Ukraine.

“This is not just about Ukraine. This is about the poorest of the poor who are on the brink of starvation as we speak,” Beasley said.

Russia and Ukraine together account for nearly a third of global wheat supplies. Ukraine is also a major exporter of corn, barley, sunflower oil and rapeseed oil, while Russia and Belarus — which has backed Moscow in its war in Ukraine — account for more than 40 per cent of global exports of potash, a crop nutrient.

‘Prepared to do our share’

Blinken said Russia must be compelled to create corridors so that food and other vital supplies can safely leave Ukraine by land or sea.

“There are an estimated 22 million tons of grain sitting in silos in Ukraine right now. Food that could immediately go toward helping those in need if it can simply get out of the country,” Blinken said.

The United Nations has said 36 countries count on Russia and Ukraine for more than half of their wheat imports, including some of the poorest and most vulnerable in the world, including Lebanon, Syria, Yemen, Somalia and Democratic Republic of Congo.

Guterres spoke with Russia’s first deputy Prime Minister Andrei Belousov on Tuesday about Russian exports of fertilizers and grains, said Russia’s U.N. Ambassador Vassily Nebenzia.

“The discussions, as far as I know, went well and positive,” Nebenzia told reporters on Wednesday, but he signaled that Ukrainian access to international markets was a separate issue.

“We are prepared to do our share. The Ukrainian grain market access, that’s another thing,” Nebenzia said.

Nebenzia said that while there were no direct sanctions on Russian fertilizers or grains, there had been a chilling effect on shipping, insurance and banking after the United States and others began punishing Russia over what Moscow calls a “special military operation” in Ukraine.

Blinken said it was “false” to blame sanctions because the United States had created exceptions and was working to ensure measures imposed by Washington “are not preventing food or fertilizer from leaving Russia or anywhere else.”

— Reporting for Reuters by Michelle Nichols and Humeyra Pamuk.

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