America’s largest farmer cooperative, CHS Inc., is warning of potential fertilizer supply disruptions from Russia as a result of Western sanctions against Moscow. The sanctions are making it “more expensive and difficult to do business with Russia,” according to CHS. In a recent SEC filing, the agricultural cooperative expressed concerns about obtaining Russian fertilizer, warning that sanctions could lead to shipment delays, inflationary pressures, disruptions in banking transactions, and volatility in foreign exchange rates and interest rates, all of which could have a material adverse effect on its business and operations.
While CHS holds no operations in Russia, it has $30 million in grain inventories sitting in silos in Ukraine that it cannot access, which will result in an “impairment charge.” The cooperative also warned that the conflict in Ukraine could escalate to a larger conflict, leading to additional sanctions imposed by the US government and other governments, which could restrict business with specific persons, organizations, or countries or with respect to certain products or services. Such an event could materially adversely affect CHS’s business operations and financial performance.
Russia is one of the world’s largest fertilizer exporters, and the impact of Western sanctions and the Ukrainian conflict is already causing fertilizer prices to soar, diesel prices to increase, and inflation to rise. International shipping companies are also avoiding trade with Russia, making it more challenging to acquire fertilizer products. Countries already experiencing food insecurity, such as emerging market economies, will be among the first to experience fertilizer and food shortages. Violent inflation protests are already starting in Peru, underscoring the global impact of the Ukrainian conflict and Western sanctions.
The farming industry is taking a hit from the Ukrainian conflict and Western sanctions against Moscow, with no food supply chain remaining unaffected. CHS’s warning highlights the need for farmers to consider alternative fertilizer sources and work with their cooperatives and suppliers to ensure that they can acquire the products needed to maintain their operations. The impact of the Ukrainian conflict and Western sanctions is being felt far beyond Russia, with repercussions being felt worldwide. The potential for a larger conflict and additional sanctions only adds to the challenges facing farmers and the global food supply chain.