War in Ukraine: consequences for agriculture and food security in Peru

Last year, the price of fertilizers rose by up to 128% and became one of the main problems affecting local farmers.

Among the factors that drove the increase in prices are the energy crisis in Europe, the rise in the exchange rate and the high freight rates that increased tariffs. To these agents is now added the war between Russia and Ukraine, countries considered the most important world suppliers of these products.

According to Miguel Pintado, a researcher from the Peruvian Center for Social Studies (Cepes), in the IV Agricultural Census carried out in 2012, six out of 10 Peruvian farmers who use fertilizers stated that they use chemical fertilizers, the main one being urea, whose largest supplier it is Russia.

According to Midagri, in 2021, Peru imported 325,816 tons of urea, of which more than 64.4% (222,910 tons) came from Russia. Meanwhile, in 2020, 75% (283,050 tons of 373,600 tons) of the urea consumed in local agriculture originated in this country.

Likewise, the entity reported that in the last year the value of the fertilizer grew by 128% and went from S/ 1,707 a ton in January to S/ 3,904 in December.

In this sense, Pintado emphasizes that the increase in the price of fertilizer, in addition to generating production cost overruns, can jeopardize the availability and access to food in the domestic market.

“Among the main products that would be affected, given the intensive use they make of these fertilizers, are potato, corn and rice”, he comments.

For his part, Ramón Diez Matallana, an economist at the Agrarian University of La Molina, points out that the rise in fertilizer prices would also be reflected in agrochemicals. “If the price of fertilizers moves, it would also have an impact on the price of pesticides and pesticides”, he manifests.

Ammonium nitrate is another fertilizer whose main supplier is Russia. In 2021, national producers imported 312,479 tons, of which more than 98% (307,279 tons) originated from this nation.

The impact of the price of wheat and corn

The barrel of West Texas Intermediate (WTI), the reference oil for the US and countries in the region such as Peru, reached peaks of up to US$ 116.57 yesterday, its highest level in almost 14 years, since September 2008.

The increase in crude oil added to the war between Russia and Ukraine has caused the prices of the main grains and cereals to reach maximum levels; as both countries together represent about 30% of wheat exports and 19% of corn.

Yesterday, wheat futures also hit a new record and reached over $473 a tonne on the Chicago Stock Exchange, while corn topped $295 a tonne.

Peru is an importer of these products, so for Miguel Pintado, the impact of the price variation will be reflected in the main derivatives of the cereal.

“Sudden changes in the global prices of these products will quickly translate into internal inflation in the different wheat derivatives, such as bread, noodles, cookies and flour”, he points out.

While the price of hard yellow corn will affect “poultry meat and eggs.

Along these lines, Ramón Diez indicates that the impact of international prices on local prices will be reflected in local prices when the existing stocks in the country are consumed, which could take between “two or three months”, approximately.