Fertilizer International 496 May-Jun 2020
31 May 2020
Lockdown lessons
“Rising risks to food demand from an economic slump caused by Covid-19 could see fertilizer demand growth slow all the way out to 2024″
The arrival of the Covid-19 pandemic has abruptly ended lives and livelihoods during its pernicious and inexorable spread across the globe. The fertilizer industry has not been immune to its parlous effects.
Covid-19’s damaging impacts could be felt for years too.
Certainly, the short-term outlook for global fertilizer demand does not make for pretty reading, as commodity analysts Argus commented recently. Citing the latest forecast from the International Fertilizer Association (IFA), they reported in May that:
“A combination of poor farm economics and logistical disruptions resulting from the Covid-19 pandemic and related lockdowns will see global fertilizer demand fall by nearly three percent in the year July 2020-June 2021 to 184 million tonnes.”
The medium-term outlook is equally downbeat. Rising risks to food demand from an economic slump caused by Covid-19 could see fertilizer demand growth slow to less than one percent per annum out to 2024.
These depressing downsides may not be fully realised. Uncertainties abound – that is the one harsh lesson Covid-19 has taught us to date. The principal uncertainties being the duration of the health crisis and the effectiveness of government containment and mitigation measures.
The question on everyone’s lips is when will life get back to normal? The honest truth is that no one knows – or what the ‘new normal’ will look like when it arrives.
So what have we discovered about Covid-19’s effects so far? Well, the capacity of the coronavirus crisis to inflict damage on agriculture and the fertilizer industry seems to depend on two things – timing and what IFA calls “a patchwork of geographical factors”.
The timing of the pandemic’s onset has proved most favourable to agriculture in the global north. Here, the effect on fertilizer deliveries has been relatively slight in regions such as North America and Europe – as most fertilizers had already been purchased and delivered for the main growing season. Equally, in the southern hemisphere, with March-April marking the end of the growing season, there has been no strong, immediate demand for large volumes of fertilizers anyway.
Instead, the pandemic’s arrival was particularly badly timed for Asian and African countries where the crop season occurs later in the year. With fertilizer sales still pending, or deliveries still in transit, the risk of delay or disruption to fertilizer supply in these regions has been much greater. To date, it has been farmers in China and India, where large volumes of fertilizers were in the pipeline when the pandemic hit, that have been left most vulnerable to delays and non-delivery.
Not all regions are equal either – as IFA points out – due to accidents of geography. Some, like the EU and Latin America, for example, are highly dependent on fertilizer imports, while other countries and regions, notably India and Africa, are particularly dependent on agricultural labour.
A country’s crop mix – another geographic factor – is also critical when it comes to the economic effects of Covid-19.
The good news is that we know demand for wheat and rice – which together account for almost 30 percent of fertilizer consumption – has remained resilient during past economic downturns. The consumption of more expensive fruit and vegetables, in contrast, is more sensitive to falls in household incomes. Intensive cultivation and their perishable nature also make fruit and vegetables susceptible to both labour shortages and logistic delays.
Highly-traded feed crops such as maize and soybeans are doubly vulnerable, being exposed to both supply disruption and falls in meat consumption. Biofuel crops – maize in North America, sugarcane in Brazil and palm oil from Indonesia/Malaysia – have also been left exposed to the collapse in price and demand for oil that has accompanied the global spread of Covid-19.
Governments have not stood idly by, however. Support is on its way with 23 countries so far having officially declared fertilizers as essential. The United States, for example, has channelled $15.5 billion in support towards agriculture, while the EU has extended state aid for its farms. In India, the government has stepped-in to procure pulses and oilseeds.
In response to unprecedented market conditions, a large part of our news section this issue is dedicated to Covid-19 updates (page 12). Also in this issue, CRU have shared their authoritative and in-depth analysis of Covid-19’s impacts (page 18).
As always, Fertilizer International will continue to report on and support the industry during the current pandemic, as it has done for more than 50 years now. That much is certain.
