Fertiliser shortage puts world food supply in peril

Western sanctions on Russia — a major exporter of potash, ammonia, urea and other soil nutrients — have disrupted shipments of those key inputs around the globe. Growers are scrambling to adjust.

The pivot can be seen in agricultural powerhouse Brazil, where farmers are applying less fertiliser to their corn, and federal legislators are pushing to open protected indigenous lands for the mining of potash.

In Zimbabwe and Kenya, small farmers are reverting to using manure to nourish their crops. In Canada, one canola farmer has already stockpiled fertiliser for the 2023 season in anticipation of even higher prices ahead.

Farmers elsewhere are making similar moves.  

In the United States, fertiliser bills are expected to jump 12pc this year, after rising 17pc in 2021.

Some growers are contemplating switching to crops that require fewer nutrients. Others plan to cultivate less acreage. Others say they’ll simply use less fertiliser, which will hurt yields.

Production is most at risk in developing nations, whose farmers have fewer financial resources to weather the storm.

“My concern is of a food crisis on a global basis,” says Tony Will, chief executive of Illinois-based CF Industries Holdings, a leading producer of nitrogen fertiliser.

Last week, Peru declared a state of emergency over fears of food insecurity.  

Global fertiliser prices were already high prior to Russia’s February 24 invasion of Ukraine, as record natural gas and coal prices forced some fertiliser makers to cut output in that energy-hungry sector.  

Western nations responded with tough economic sanctions on Russia, while the USA and the EU imposed new sanctions on Belarusian President Alexander Lukashenko, who has provided support for Russia’s offensive.

Combined, Russia and Belarus last year accounted for more than 40pc of global exports of potash last year, one of three critical nutrients used to boost crop yields, Dutch lender Rabobank said this month.

Additionally, Russia accounted for about 22pc of global exports of ammonia, 14pc of the world’s urea exports and about 14pc of mono-ammonium phosphate (MAP).

Sanctions have disrupted sales of fertiliser and crops from Russia. Many Western banks and traders are steering clear of Russian supplies for fear of running afoul of the rapidly changing rules, while shipping firms are avoiding the Black Sea region due to safety concerns.

It all amounts to a double whammy for the global food supply.

Russia and Ukraine are major grain producers. Together they account for about 30pc of global wheat exports and 20pc of corn exports.

Grain shipments through the Black Sea have already been disrupted. Stalled deliveries from those two countries have spurred galloping global food inflation.

The World Bank said last week that a number of developing countries face near-term wheat supply shortages due to their high dependence on Ukrainian exports.

But the fertiliser crisis is in some respects more worrying because it could inhibit food production in the rest of the world, says Maximo Torero, chief economist for the UN Food and Agriculture Organization.

“If we don’t resolve the problem of fertiliser, and trade of fertilisers doesn’t continue, then we’ll have a very serious problem of supply next year,” he says.

Brazil, the world’s biggest soybean exporter, relies heavily on imported fertilisers such as potash, which accounted for 38pc of the crop nutrients it used last year. Russia and Belarus were the source of half of those shipments.

Prior to the invasion of Ukraine, Brazilian farmers were already reducing corn plantings due to rising fertiliser prices.

Soybean cultivation will likely be impacted as well, with growers expanding more slowly than in previous years.

In the state of Mato Grosso, farmer Cayron Giacomelli says he has already reduced fertiliser use on his corn crop. He says he’ll do the same when he plants soybeans later this year, a move he reckons will shrink his harvest by 8pc.

Lawmakers from Brazilian farm states, meanwhile, are pushing for legislation that would open indigenous lands in the Amazon to potash mining. That measure is opposed by members of the Mura tribe, who say mining would despoil the natural habitat on which they depend.

The bill is making its way through congress.

In Zimbabwe, scarce and pricy imports have forced corn growers to make their own fertiliser. “We mix cow dung or chicken waste with zinc,” says farmer Boniface Mutize.

It’s the same in Kenya. Farmer Mary Kamau says she too has slashed purchases of commercial fertiliser and is using manure to nourish the coffee and avocados she grows on 12ac. She worries about the consequences for her family.

“If I don’t get a good harvest, I don’t get good prices. And that will affect me for the next two years — it’s not just this season,” she says.

In the USA, fifth-generation New Mexico farmer Mike Berry has similar worries. He recently paid $680 a ton for liquid nitrogen to fertilize his corn crop, an “exorbitant” price he said was 232pc above last year’s price.

Berry says he plans to cut his spring plantings of corn for livestock feed to about 300ac from his usual 400-600ac. He says he will also reduce applications of liquid nitrogen by about 30pc, which could drop his yields by 25pc.

“We’re going to produce less,” he says.

That might seem short-sighted considering commodity prices have jumped sharply in recent weeks. But the cost of growing crops is outpacing potential revenue for many farmers.

“Planting decisions are increasingly being made not on market fundamentals but rather on the cost of production driven by the price and supply of fertiliser,” dozens of US lawmakers wrote in a March 17 letter to the US International Trade Commission.

They were seeking relief from duties on fertiliser imports from Morocco and Trinidad & Tobago.

US farmer Don Batie describes the stressful process of securing enough fertiliser for this year’s planting.

“It’s nuts,” says Batie, who grows corn and soybeans on 1,500ac in Lexington, Nebraska. “By the time they get a price and they quote it to you, the price changes.”

Asia is struggling, too. India, which imports fertiliser for its sprawling agriculture sector, is increasingly turning to Canada and Israel to replace its Russian supplies.

Thailand, meanwhile, is facing pressure on its signature rice crop. Russia and Belarus accounted for about 12pc of its fertiliser imports last year. But domestic price controls on fertiliser are squeezing Thai importers as global market prices explode.

“If you’re a merchant, and you’re absolutely going to lose money, will you still import more stuff?” asks Plengsakdi Prakaspesat, president of the Thai Fertiliser and Agricultural Supplies Association..

China last year imposed fertiliser export curbs to protect its own farmers as global prices soared due to strong demand and high energy prices. Beijing was expected to ease those restrictions this year, potentially boosting world supply, says Gavin Ju, principal fertiliser analyst in the Shanghai office of commodities consultancy CRU. But he said that’s less likely now with the global market in chaos.

Concerns over rising inflation and a protracted Ukraine war have some farmers planning well ahead.

In Manitoba, Canada, corn and canola farmer Bert Peeter recently agreed to spend more than Can$500,000 (€360,000) buying 80pc of the fertiliser he’ll need — for 2023. Although prices are soaring, he figured things could still get worse.

This “might not be over after one year,” Peeter said.

Reuters