📈 economics

Impacts of the Russia-Ukraine Conflict on Global Fertilizer and Commodity Markets

This paper analyzes 2015–2024 data to demonstrate that the Russia-Ukraine conflict increased global fertilizer prices by 19% to 24% through trade reallocation and a market-wide premium rather than a uniform supply cut, causing severe food price pass-throughs in low-income importing nations.

Original authors: Md Deluair Hossen, Andrew Muhammad, Sandro Steinbach

Published 2026-08-07

📖 4 min read☕ Coffee break read

CC BY 4.0

Original authors: Md Deluair Hossen, Andrew Muhammad, Sandro Steinbach

Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). ✨ This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer

Imagine the global economy as a massive, interconnected kitchen where every country is a chef trying to cook a meal for its people. In this kitchen, there are special ingredients called "fertilizers" that help crops grow big and strong, just like vitamins help a body grow. Without these ingredients, the food supply shrinks, and the price of the final meal goes up. Sometimes, the kitchen gets chaotic because of bad weather or a pandemic, but usually, chefs can swap ingredients from different pantries to keep things running. However, when two of the biggest pantry owners in the world suddenly get into a massive fight, the whole kitchen freezes. This is the story of what happens when a geopolitical conflict disrupts the flow of essential farming supplies, turning a simple recipe for food into a high-stakes game of survival and economics.

This paper investigates exactly that chaos: the Russia-Ukraine conflict and how it threw a wrench into the global fertilizer and food markets. The authors, researchers from the University of Tennessee and North Dakota State University, wanted to figure out two main things. First, how much more expensive did fertilizers get because of the war, and was it just because the ingredients to make them (like natural gas) got pricier, or was there a "war tax" added on top? Second, how did these higher fertilizer costs trickle down to the price of food on the shelves of regular people, especially in poorer countries? They used a decade of monthly data, acting like detectives looking for clues in price tags and shipping records to see if the war caused a permanent price hike or just a temporary panic.

The researchers found that the war did indeed act like a massive, invisible surcharge on fertilizer prices. Even after accounting for the rising cost of natural gas and other raw materials, the prices for five major types of fertilizer—Urea, MOP, DAP, MAP, and NPK—jumped by a significant amount just because the conflict started. Specifically, the study estimates that Urea became about 19.9% more expensive, MOP rose by 23.9%, DAP by 23.3%, MAP by 21.8%, and NPK by 19.3% during the war period compared to what they would have cost without the conflict. It wasn't just that the supply of fertilizer vanished; rather, the market got messy. The data shows that while exports from Belarus (a major supplier that got sanctioned) collapsed, other countries stepped up to fill the gap. So, the total amount of fertilizer moving around didn't disappear; instead, the trade routes got rerouted, and that reshuffling made everything more expensive for everyone. It's like if your favorite pizza place suddenly stopped delivering, and you had to order from a place across town that charges a "delivery fee" just for the trouble of coming so far.

This price hike didn't stop at the farm gate; it traveled all the way to the dinner table. The study found that the war also made major food crops like wheat, maize, sunflower oil, and soybeans more expensive. Wheat prices, for instance, saw a "war premium" of about 29% that couldn't be explained just by rising energy costs. But here is the most striking part of the story: the pain wasn't felt equally. The paper reveals that the impact on food prices was much worse for low-income countries than for wealthy ones. In poor nations, the price of wheat and maize soared dramatically—about 58% and 41% higher, respectively, than expected without the war. In contrast, wealthier nations saw much smaller bumps, around 12% to 15%. The authors suggest this is because richer countries have better tools to cushion the blow, like stronger currencies or government subsidies, while poorer countries have to pay the full, steep price immediately.

The researchers were careful to rule out other reasons for these price spikes. They checked to make sure the price jumps weren't just leftovers from earlier problems, like sanctions on Belarus that happened before the war started or export bans by China. By using a "placebo test"—pretending the war started in 2018 or 2019 when it didn't—they showed that the price spikes only happened when the real war began in 2022. This gives them confidence that the conflict itself was the main culprit. The paper concludes that the war didn't just cut off supplies; it created a market-wide price premium that hit the poorest nations the hardest. The takeaway is clear: to protect food security in the future, the world needs to diversify where it gets its fertilizer, especially to help the countries that can't afford the extra cost.

Technical Summary: Impacts of the Russia-Ukraine Conflict on Global Fertilizer and Commodity Markets

Problem Statement
The paper investigates the economic disruptions caused by the February 2022 Russian invasion of Ukraine, specifically focusing on global fertilizer markets and their downstream effects on agricultural commodity and food prices. Russia and Belarus are critical exporters of key agricultural inputs, particularly potash and nitrogen-based fertilizers. The conflict and subsequent economic sanctions raised concerns regarding supply chain fragility, input cost inflation, and food security, particularly in import-dependent low-income nations. While previous literature has examined war-trade reallocation and commodity price responses separately, this study seeks to quantify the specific "war-period premium" in fertilizer prices, disentangle it from input cost drivers (such as natural gas), and trace the pass-through effects to domestic food prices across different income groups.

Methodology
The authors utilize a comprehensive monthly dataset spanning January 2015 to December 2024. The analysis focuses on five major traded fertilizer categories: Urea, Muriate of Potash (MOP), Diammonium Phosphate (DAP), Monoammonium Phosphate (MAP), and NPK compounds.

Primary Empirical Model: The study employs a log-linear specification to estimate the percentage change in fertilizer prices coinciding with the conflict. The model regresses the log of fertilizer prices on the logs of their primary production inputs (e.g., natural gas for Urea, potassium chloride for MOP, phosphate rock for phosphates) and a war-period dummy variable ( $W_t$ ) starting March 2022. This approach isolates the war coefficient ( $\lambda$ ) as a price premium net of fundamental input costs and seasonality.
Identification Strategy: To address identification challenges, the authors utilize three complementary strategies:
- Counterfactual Analysis: Estimating a "no-war" price path by residualizing the war coefficient to visualize the divergence between actual and fundamental-driven prices.
- Bilateral Panel with Policy Controls: Using UN Comtrade data to construct a reporter $\times$ partner $\times$ commodity panel. This specification includes explicit step dummies for pre-war policy shocks (e.g., 2021 sanctions on Belarus potash, China's phosphate export ban, U.S. duties on Moroccan phosphate) to ensure the war coefficient does not absorb pre-existing policy trends.
- Event Study: A monthly event-study specification using Poisson regression with high-dimensional fixed effects (PPMLHDFE) to trace dynamic trade flows for Russia, Belarus, and the Rest of the World (ROW) around the invasion onset.
Downstream Analysis: The study extends the framework to agricultural commodities (wheat, maize, sunflower oil, soybeans) and domestic food prices (rice, wheat, maize) across World Bank income groups, controlling for crude oil prices and seasonality.

Key Results

Fertilizer Price Premium: The war-period indicator is positive and statistically significant (1% level) for all five fertilizer types. After controlling for input costs, the war induced a price premium ranging from 19.3% (NPK) to 23.9% (MOP). The authors note that because input prices (like natural gas) were also affected by the war, these coefficients represent conservative lower bounds on the total war effect.
Trade Reallocation vs. Supply Cut: The event study reveals that the conflict did not cause a uniform global supply cut. Instead, it triggered a trade reallocation: exports from sanctioned Belarus collapsed (falling by over two-thirds at the lowest point), while exports from non-sanctioned "Rest of the World" suppliers expanded persistently. This substitution mechanism, combined with market-wide price adjustments, drove the observed premiums.
Commodity Impacts: The war-period premium extended to Black Sea grain and oilseed markets. Wheat prices rose by approximately 29% (net of energy costs) and sunflower oil by 11.4% during the war period.
Income-Based Pass-Through: The impact on domestic food prices varied significantly by importer income. The pass-through of war-induced costs to staple food prices was steepest in low-income countries. For wheat, the war-period premium in low-income importers was approximately 58.3%, compared to 12.0% in high-income importers. This disparity is attributed to weaker domestic price stabilization mechanisms and tighter transmission of imported costs in poorer nations.

Significance and Contributions
The paper makes three primary contributions to the literature on conflict and agricultural economics:

Mechanism Identification: It identifies trade reallocation as the primary mechanism behind the war-period fertilizer premium, moving beyond simple binary shock analysis to show how sanctioned supply was replaced by expanded non-sanctioned flows, resulting in a market-wide price increase rather than a volume collapse.
Unified Framework: It develops a unified analytical framework that jointly considers input markets (five fertilizer types) and output markets (Black Sea grains and oilseeds), documenting the parallel impacts of the conflict across the agricultural supply chain.
Distributional Analysis: It traces the pass-through of global shocks to domestic food prices, demonstrating that the burden of the price shock is not distributed evenly. The findings highlight that low-income countries face the most severe food security risks due to the steep pass-through of input costs to staple food prices.

Limitations and Claims
The authors maintain a modest stance regarding causal inference. They acknowledge that observational time-series data cannot support strict causal identification without the caveats of a "bad control" problem (since input prices themselves are war-affected). Consequently, the headline estimates are interpreted as conservative lower bounds. The study relies on robustness checks—including placebo tests with pre-war dates and explicit controls for overlapping policy shocks—to support the interpretation that the estimated premiums are specific to the February 2022 invasion rather than spurious correlations with pre-existing trends. The paper concludes that policies aimed at diversifying fertilizer sourcing should prioritize low-income importing countries, where the transmission of input costs to food insecurity is most acute.

More like this