FARGO, N.D. — It has been almost a year since Russia invaded Ukraine, and the possibility of Russia “weaponizing” its energy resources or unleashing a nuclear attack have the potential to create new turmoil in global markets, according to an expert in the fertilizer industry.
Josh Linville, the director of fertilizer at StoneX, addressed the AgFocus conference hosted by Ag Country Farm Credit Services in Fargo on Jan. 25.
Linville outlined how Russia is a huge player in the energy and fertilizer markets and uncertainly about whether those commodities would continue to flow as the war heated up has had markets reeling.
He said trying to predict prices in this climate is a “fool’s game.”
“We're talking major global events and that's why risk management and long-term profitability is so much more important today than it's ever been,” Linville said.
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Russia has been able to find buyers for fertilizer in markets such as India.
Belarus, on the other hand, had its port access on the Baltic Sea cut off by Lithuania, crippling its ability to move fertilizer.
Russia, Belarus and China are three of the big players in global fertilizer production.
“If they decided they want to start weaponizing fertilizer flows, they could have a huge effect,” Linville said.
He said farmers need to keep in mind that things such as weather and global politics are important to their business
“World factors absolutely mean something to your organization,” Linville said. “Something that happens in China, it matters to you. Something that happens with Russia invading Ukraine, it matters to you. A good or a bad harvest in Brazil, it matters you.”
On the Ukraine front, Linville said Russia keeps talking about using nuclear weapons and could unleash a “scorched earth” tactic on a huge grain producer.
“What do you think happens with grain values around the world if they started taking that approach and they completely destroy that country? And if grain values go up? I don't need to tell you what fertilizer prices are going to do,” Linville said. “Trust me, the fertilizer market has never met an emergency it couldn't take advantage of.”
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Even short of a nuclear attack, he sees a prolonged fight in Ukraine.
“It looks like Russia is trying for a new offensive,” Linville said. “They're calling people up, even though they don't want to fight, they're forcing them into the military. It looks like they're starting to stage in Belarus in the northeast and southeast sides of Ukraine.
“So unfortunately, we can be hopeful that this thing was going to come to a peaceful conclusion and Russia is going to get defeated. It actually looks like they're going to continue to press on.”
With some of Ukraine’s allies now willing to send in tanks, he said it's an escalation of a bad situation.
“You start to see other things spiral and spiral. It's really hard to get out of this cycle,” Linville said.
Some of the other emergencies that the fertilizer industry has met in recent months have been low water levels on the Mississippi River and the threat of a strike by railroad workers.
While he said both situations have improved, they could get worse again.
And there’s the threat of a recession.
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Linville encouraged farmers to think of themselves as CEOs.
“It does not matter how big or how small you are. You are part of this world economy.”
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