Fertilizer International 505 Nov-Dec 2021
30 November 2021
Food and fertilizer fears
“Europe is at the epicentre of fertilizer industry woes right now. Whether matters improve or worsen in the region will largely depend on the weather”
Are we on the verge of a fertilizer production, trade and supply crisis? Some usually sober and authoritative voices seem to think so.
Events have certainly collided this autumn to create an increasingly toxic operating environment for the industry. The dizzying upwards spiral in fertilizer prices, crippling supply and logistical constraints, and the European energy crunch, to name just three.
This sense of a market unravelling has been heightened in recent weeks by the emergence of that measure of last resort – the export ban. By blocking trade, this policy could be the coup de grâce that turns an unfortunate sequence of events into a global fertilizer scarcity crisis.
Summing up the mood at the International Fertilizer Association’s annual conference in Lisbon in September, Argus Media reported:
“Delegates spoke of a potential “disaster” and “catastrophe” ahead, based on concerns over high prices, tight supply and logistics. The key to the entire situation is a sharp increase in gas prices, which have led to significant rises in costs for nitrogen-based fertilizers and… production curtailments in Europe.”
Speaking from the COP26 climate summit in Glasgow in early November, Yara’s president and CEO Svein Tore Holsether could not have been more forthright. He warned of a dramatic shortfall in food production as rising energy prices cascade through global agriculture.
Holsether told Fortune magazine: “I want to say this loud and clear right now: we risk a very low crop in the next harvest. I’m afraid we’re going to have a food crisis… not having food is not annoying, that’s a matter of life or death.”
In Europe, natural gas prices hit an all-time high in September. “To produce a tonne of ammonia [in Europe] last summer was $110 and now it’s $1,000 – so it’s just incredible,” Holsether said.
Fertilizers Europe viewed these unprecedented gas prices – and the resulting ammonia production shutdowns (see our special report on page 8) – as an existential threat to the EU fertilizer industry. “There is a real risk this will lead to permanent closures or relocation of our sector outside Europe, if this situation is not addressed,” the trade body said.
Fertilizer supply problems are unlikely to ease, even with an early return to normal European production, suggested Argus:
“As it stands, the most immediate concern is that there will simply not be enough nitrogen available to farmers come the key spring application season. A subsequent problem would be an extreme backlog and bottleneck of deliveries in early 2022.”
Julia Meehan, the head of fertilisers at ICIS, highlighted a more widespread and serious global problem. She shone the spotlight on both high prices and the export bans now being put in place in Turkey, China and Russia.
“We are seeing record prices for every fertilizer type, which are all way above the previous highs in 2008 – it’s very, very serious,” Meehan said. With both crop and fertilizer prices at record highs, she warned of potential food shortages next year.
“Farmers are talking about switching their crops from cereals such as wheat and barley, which requires fertilizer containing high levels of nitrogen, to beans and pulses which need none,” she said.
Recently introduced curbs on fertilizer exports by three major producing countries is the other emerging concern. These have been imposed to guarantee supplies to domestic farmers in China, Russia and Turkey.
Turkey introduced an export licensing requirement for fertilizers in early September. Chinese authorities then followed suit with extra customs inspections on fertilizer exports from mid-October.
China’s move to curb fertilizer exports will be felt around the world, particularly by its biggest buyers, India, Pakistan and Southeast Asia. Even readyto-ship cargoes are being held in China for extra checks and/or new export certificates.
Russia has also moved to limit fertilizer exports for six months from the start of December. Russian prime minister Mikhail Mishustin said his country will set export quotas of 5.9 million tonnes for nitrogen fertilizers and 5.35 million tonnes for other multi-nutrient fertilizers.
Europe is at the epicentre of fertilizer industry woes right now. Whether matters improve or worsen in the region will largely depend on the weather. An unexpectedly mild winter could ease market tightness by bringing gas storage levels back to normal.
Europe’s fertilizer producers and farmers will certainly not be dreaming of a white Christmas. The spring application season and 2022 harvest could well depend on a winter without snow and ice.
