Fertilizer update provided at forum
Arlington, Va. – During the U.S. Department of Agriculture’s 99th Annual Agricultural Outlook Forum, International Fertilizer Association Market Intelligence Service Director Laura Cross; StoneX Vice President of Fertilizer Josh Linville and University of Illinois, Urbana-Champaign Associate Professor Hope Michelson discussed a presentation titled, “Fertilizer Availability and Price Volatility – Implications for Production Costs, Consumer Prices and Food Security.”
Global fertilizer market drivers
To begin, Cross noted the last 12 to 18 months have been fairly unprecedented with the number of questions arising about fertilizers, especially from outside the sector.
She explained fertilizer markets are global commodities and prices are set based on the balance between supply and demand. They fluctuate between a price floor set by a marginal cost of production and a price ceiling, which is driven by a number of factors.
She noted energy and the presence of raw materials drives supply, while global food demand, crop prices, ability to pay and the foreign exchange market drives demand.
“Fertilizer markets sit directly between energy and food markets. And, what this means is there is quite a lot of opportunity for disruption, like we’ve seen in the last 12 months as a result of global changes,” said Cross.
“Then, we add in other factors outside of the control of any given commodity market – weather, planting progress, trade disruption, domestic policies and geopolitics – which have really had an impact,” she added.
Fertilizer myths debunked
Cross noted one myth about fertilizer is there is a shortage around the world. However, this isn’t true.
She explained global phosphorus fertilizer production increased from 2021 to 2022, and while nitrogen and potash production were curtailed somewhat during this time, the large drop-off in production was never seen.
“Global fertilizer production is expected to increase in 2023, with the urea capacity up two percent and phosphorus production up seven percent,” she said. “Potash production is expected to fall about 14 percent, but it would only be around a five percent drop compared to 2019.”
She noted another myth about fertilizer is prices are still at record-high levels. Again, this is not true.
Cross mentioned while there are certainly fertilizer supply challenges, fertilizer affordability is much better heading into the 2023 growing season compared to 2022.
However, U.S. farmers are running out of time to assess their nitrogen fertilizer form needs. If they wait until April, there most likely won’t to be enough, mentioned Linville.
“Things happening halfway around the world, absolutely matter at home,” Linville noted.
Going into 2023, he said there are two entities he’s watching – Europe and Russia.
Despite recent global disruptions, Russia continues to export fertilizer, particularly urea, across the world despite sanctions from other countries.
According to Linville, Russia is the world’s largest leading producer of anhydrous fertilizer, and sanctions have not stopped the production of nitrogen fertilizer.
He noted one thing to watch for in the global fertilizer market this year could be U.S. farmers switching to different forms of nitrogen due to different affordability indexes before the 2023 growing season.
“This could cause some shifts in nitrogen fertilizer demands,” he said. “Farmers may be complaining about the price of fertilizer, but they’re loving the price of grain. The value is there.”
Food insecurity and fertilizer prices
Michelson shared after decades of declines, global hunger is increasing, affecting 46 million more people in 2021 than in 2020 and 150 million more people in 2021 than in 2019.
There are two main types of food insecurity – acute, what’s in the news, is severe and impacts a small share of the world’s insecure population and chronic, what does not make the news but is the dominate form of food insecurity in the world.
Small farms produce roughly 35 percent of the world’s food and consist of less than five acres, and large increases in fertilizer prices have a devastating effect on the chronically food insecure, Michelson noted.
“High fertilizer prices can tip food-insecure individuals into even worse situations,” she said. “Shocks matter for the chronically food insecure and those who rely on them.”
For example, last year, in Kenya, fertilizer prices increased by 60 percent, causing farmers to reduce their fertilizer use by 13 to 54 percent. As a result, yields dropped with less fertilizer applied, causing maize prices to increase considerably, she explained.
“This put 10 percent of the Kenyan population at risk of food security,” she said. “While fertilizer prices have stabilized, prices are still expensive for struggling farms across the world.”
She noted investments in Extension funding, infrastructure improvements and risk protection products are needed in low-income countries, not just access to fertilizer.
“These investments are a means to protect vulnerable households, communities and regions from crises,” Michelson concluded.
Brittany Gunn is the editor of the Wyoming Livestock Roundup. Send comments on this article to email@example.com.