Analyst predicts that food prices will rise by tens of percent as a result of high fertilizer prices

World fertilizer prices are at all-time highs, according to the Green Markets North America Fertiliser Price Index, with the index up 40 percent since the start of the Russian invasion of Ukraine. In Europe, fertilizers such as ammonia, nitrogen, and nitrates have risen by a third, according to XTB analyst Stepan Hajek. Households will feel the increase in fertilizer, grain, or seed prices in food prices, making food up to ten percent more expensive, he said.

“Russian fertilizers are almost everywhere. In 2021, Russia was the largest exporter of nitrogen fertilizers and the second-largest exporter of potassium and phosphate fertilizers in the world,” Hajek said. Although trade with Russia has not been completely halted, importers are avoiding Russia, he added.

Russia accounts for 14 percent of global fertilizer exports, which will have a substantial knock-on effect on the food market. In addition, gas is a crucial ingredient for fertilizer production. Its growth in Europe has led to a reduction in production, significantly exacerbating the shortage of fertilizer on the market.

“While farmers have been able to pass on higher commodity prices to the consumer in the past, high fertilizer prices and persistent shortages may lead to demand destruction,” Hajek warned. According to the UN agency, global food prices increased by 20.7 percent in February alone.

Rising costs, coupled with tight markets for fertilizers, grains, seeds, and ongoing shipping problems, will further exacerbate the food crisis, as they did in 2007. However, this time, the situation will not primarily affect emerging economies, which import most of their food, but will also affect the Czech Republic.

“We can expect prices to rise by tens of percent for foods such as baked goods and fruit, where the higher cost of cereals or fertilizers will be felt the most. However, we will also pay more for vegetables, meat, and oils, “Hájek pointed out.

However, he said there are ways to prepare for the rise in food prices and help the weakest segments. “Following the example of Poland, we can reduce VAT, which has reduced the rate from five to zero percent. The VAT rate on food in the Czech Republic is 15%, significantly higher than the 7% rate in neighboring Germany. Over time, sales of Czech food may decline as people go abroad to shop,” Hájek said.