*

EU tariffs on Russian fertiliser imports started in July

*

EU aiming to starve Moscow of export revenues to fund war

*

Tariffs can be postponed if prices rise too high, EU has

said

*

Russia's Mazepin says European farmers will pay higher

prices

By Alexander Marrow

LONDON, Aug 22 (Reuters) - EU tariffs on Russian

fertiliser imports that aim to cut funding for Moscow's war in

Ukraine have so far hit European farmers, raising costs and

risking higher consumer prices while Russian companies say they

can divert exports to other markets.

"We're shooting ourselves in the foot," farmer Cedric

Benoist, deputy secretary general of French wheat farmers union

AGPB and head of the cereals committee of EU farmer association

Copa Cogeca, told Reuters, saying farmers are now faced with

paying higher global prices.

Global fertiliser prices have been rising this year, World

Bank data shows, in part due to the additional levies introduced

on July 1 on top of import tariffs, adding to other challenges

facing European farmers such high energy costs and environmental

regulations.

Western countries did not impose sanctions on food or

fertiliser exports over Moscow's February 2022 invasion of

Ukraine. But fertiliser export tariffs are now being imposed

gradually over three years by Europe as it looks to further

reduce dependence on Russian supplies.

Russia produces more than 20% of the world's fertiliser and

supplies around 25% of the EU's fertiliser imports.

The EU said it will be monitoring the impact of tariffs

closely to ensure that the EU's fertiliser industry and farmers

are protected.

Tariffs kicked off at 40 euros per metric ton for urea and

nitrogen in July and are set to reach 315 euros per ton from

July 2028. Average prices for urea, a nitrogen-based fertiliser,

rose 26.5% to $496 per metric ton from May to July, World Bank

data showed.

The EU does not yet have data to evaluate the impact of its

tariffs, but an official said the tariffs can be postponed if

the result is that prices rise too high.

"Due to...hesitancy around Russian purchases, European

suppliers are pricing their products higher than in other

regions," independent fertiliser market analyst Swati Kushwaha

told Reuters, referring to prices of fertiliser products.

"Consequently, buyers are turning to more expensive sources,

like Canada."

Farmers are concerned, particularly as wheat prices have hit

five-year lows.

Benoist said lots of farmers were holding off buying, hoping

fertiliser prices would fall.

"It can't last at this price, given the price of wheat,"

Benoist said. "But right now, in terms of profitability for

farmers, it's completely unsustainable."

Rising prices for fertilisers such as diammonium phosphate

(DAP) and urea contributed to soaring consumer prices after

Russia's invasion of Ukraine. Prices eased in early 2023, but

are once again rising.

Average annual DAP prices, down to $550 per metric ton in

2023 from $772.2 per metric ton in 2022, according to World Bank

data, were back up to $736 per metric ton in July on average,

rising 10% since May when the tariffs won parliamentary backing.

Farmers across Europe protested throughout 2024 against

excessive regulation, free-trade deals and efforts to bring down

food inflation that left many producers unable to cover high

costs for energy, fertiliser and transport.

GLOBAL SUPPLY SHIFTS

Dmitry Tatyanin, CEO of Russia's Uralchem, told the RIA news

agency in June that the fertiliser producer would redirect

European exports to other markets if necessary.

Reuters could not determine whether Russian producers had

started diverting supplies. Major producers Acron, PhosAgro and

EuroChem did not respond to requests for comment.

Russian producers are major suppliers of potash, urea and

phosphate to markets such as Brazil, India and the United

States, a report from Canadian fertiliser producer Nutrien ( NTR )

showed.

Billionaire Dmitry Mazepin, who resigned as CEO of Uralchem

and reduced his stake to 48% from 100% after being added to an

EU sanctions list in March 2022, said sanctions on Russia had

created problems and raised prices.

African, Indian, and Chinese farmers ultimately buy

fertiliser at higher prices because Russian fertilisers have

longer distances to travel, Mazepin told Reuters.

"In the end, European farmers will pay extra for these

tariffs," Mazepin said.

Uralchem, which declined to comment, is not under sanctions

and Mazepin no longer has any operational involvement.

General sanctions on Russia have made it harder for traders

to process Russian payments or to obtain vessels and insurance.

However, Norwegian fertiliser producer Yara International ( YRAIF )

said Russian fertiliser imports to Europe significantly

increased since Moscow's 2022 invasion, with urea imports 48%

higher in the 2023-24 season, compared to the average of five

seasons before the war.

EU countries sharply increased imports of Russian

fertilisers in anticipation of the import duties, Yara ( YRAIF ) added.

"We fully understand that tariffs can cause concern amongst

European farmers, but the tariff measures have been designed by

EU policymakers with farmers' long-term stability and resilience

in mind," Yara ( YRAIF ) said, adding that the tariffs were important in

levelling the playing field for European fertiliser producers.

Antoine Hoxha, director general of industry lobby

Fertilizers Europe, said it was too early to assess the tariffs'

impact, but said EU countries have ample stocks and that tariffs

would ultimately benefit Europe's strategic autonomy.

Reuters could not determine how long those stocks would last

before any potential pressure on consumer prices begins to

filter through.