Fertilizer prices may, if the fallout of the Ukraine war persists, stay high “throughout 2022 and beyond”, and take an even “heavier toll” on farm production decisions next year.
The current spike in fertilizer prices may prove more long-lasting that the previous one, in 2007-08, when Chinese export tariffs, rising energy costs and soaring crop markets, boosted by enhanced demand for biofuel use, drove a more-than-doubling in nutrient values, US officials said.
While then, the rally proved “short-lived once the demand for fertilizer fell”, undermined by slowing economic growth and a retreat in commodity prices, this time price gains may prove more persistent, thanks to the knock-on effects of the Ukraine war.
Not only have many countries, in response to the conflict, imposed sanctions on Russia, and curbs on imports from Russia – which with military partner Belarus is responsible for 23% of global fertilizer exports – but the Kremlin too has slapped quotas on nitrogen shipments.
China too, a key nitrogen and phosphate exporter, has imposed fertilizer export quotas in the face of energy rationing which has curtailed production, US Department of Agriculture staff said, adding that “China’s suspension of fertilizer exports significantly diminished the global supply”.
With Ukraine’s, albeit small, fertilizer industry shutdown too, and demand higher than 15 years ago thanks to expansion in emerging market needs, nutrient prices look poised to stay high.
‘Even more dire’
“Supply issues may contribute to elevated fertilizer prices for a prolonged period, as the conflict between Russia and Ukraine continues,” the USDA said.
“Global fertilizer prices,” at or near record levels, “may remain elevated throughout 2022 and beyond.
From a farming perspective, this may mean an “even more dire” outlook for 2023 planting decisions, as compared with those for this year, when many growers have been able to rely on stocks of fertilizer bought at lower prices.
“As the Russia-Ukraine war continues and the supply of fertilizer remains limited, high prices are likely to have a more profound impact on 2023 planting decisions.
“The impact of fertilizer prices could likely take a heavier toll on 2023 agricultural production decisions,” both in the US and elsewhere.
‘Threatening food security’
The fallout looks set to hit in particular on importing countries. The USDA noted that Brazil, which imports more than 60% of its fertilizer, had “already experienced a 15% year-over-year reduction in first quarter [January to March] fertilizer imports”.
The report added that this decline “could negatively impact its second corn crop production for 2022”, with corn a particularly nutrient-hungry crop.
The USDA also stressed the implications for countries in sub-Saharan Africa, where nutrient application rates could fall from already-low levels.
“Reducing these rates further could negatively impact crop yields, threatening food security for some of the more vulnerable populations.”