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Why people are talking about the global fertilizer shortage Prices in the fertilizer industry have been on the rise since the beginning of the pandemic, as supply chain disruptions have decreased accessibility to products which are necessary to produce fertilizers, including natural gas, potash, and other chemicals. Global and regional events have further contributed to supply chain disruptions that are impacting the supply of fertilizer and its inputs. China produces 25% of the fertilizer and fertilizer inputs in the global fertilizer market and have taken actions over the past year that have intensified the global shortage.[1] In October 2021, China introduced strict inspection requirements for exports of fertilizers and their inputs. In July 2022, China tacked on export quotas on crucial fertilizers inputs to ensure its domestic supply. These barriers decreased the amount of fertilizer and fertilizer inputs available for export, lessening global supply and forcing some countries to look to import these products from elsewhere.
The Russia-Ukraine War exacerbated fertilizer shortages and subsequent price increases. Russia and Belarus supply 40% of the world’s potash, or potassium salts, a key input of fertilizer. Russia also exports 11% of the world’s urea and 48% of ammonium nitrate, a type of nitrogen fertilizer. Both reactionary domestic export quotas by Russia and tariffs by the United States and many key trading partners as a result of the invasion of Ukraine have increasingly cut off access to Russian fertilizer and inputs. How the fertilizer shortage is contributing to food insecurity As fertilizer shortages continue, global food shortages are likely. The World Bank, International Monetary Fund, United Nations World Food Program, and World Trade Organization attribute current food insecurity to the fertilizer shortage and ongoing supply constraints. In a joint statement, the heads of these organizations called for action by the international community to avoid further consequences of global food insecurity: “The rise in food prices is exacerbated by a dramatic increase in the cost of natural gas, a key ingredient of nitrogenous fertilizer. Surging fertilizer prices along with significant cuts in global supplies have important implications for food production in most countries, including major producers and exporters, who rely heavily on fertilizer imports. The increase in food prices and supply shocks can fuel social tensions in many of the affected countries, especially those that are already fragile or affected by conflict.”[2] The increased cost of fertilizer, an essential part in the production of agricultural commodities and food staples, may result in smaller yields if farmers use less fertilizer or plant less crops. These factors will increase the cost of finished products.[3] Consumers in the United States and around the world may continue to see rising prices where they shop as the supply of food and agricultural products is impacted. The food shortage has already triggered some protectionist policies in various countries around the world. Since the invasion of Ukraine, over 20 countries have put in place policies protecting their agricultural industries, including restrictions on the export of wheat in countries such as India, Egypt, and Afghanistan.[4] The number of countries insulating their agriculture industry and products may increase with the fertilizer scarcity, as administrations prioritize feeding their populations. What the future holds In the United States, a country which relies on potassium fertilizer imports to meet demand, many lawmakers believe that a solution is the temporary elimination of duties on imports of fertilizer to reduce farmers’ operating costs.[5] As recent as 14 July 2022, more than thirty representatives, both senators and House members, petitioned the Biden Administration to end anti-dumping and countervailing duties (AD/CVD) on imports from major fertilizer and fertilizer input exporters, including Morocco and Trinidad-Tobago.[6] On 18 July 2022, the International Trade Commission (ITC) ruled that the U.S. fertilizer industry is not being injured by urea ammonium nitrate fertilizer imports from Russia or Trinidad-Tobago, and therefore removed AD/CVD tariffs applied to imports of the fertilizer from these countries.[7] There has been no change in the AD/CVD duties applied on Moroccan phosphate. Internationally, many world leaders are calling for discussion and immediate resolution to the shortage to avoid any humanitarian consequences. A recent proposal from Indonesia called member countries to host a forum of the G20 finance and agriculture ministries to address the issues of food insecurity and the global fertilizer shortage.[8] Most pressure is directed toward Russia and their occupation of ports along the coast of the Black Sea, but other policies include supporting investments for food, irrigation and nutrition projects by international NGOs and governments, and subsidies for products affected by the shortage. An example of a policy can be seen in the European Bank for Reconstruction and Development’s war relief package where the organization has allocated €500 million for food security and trade finance for agricultural and food products in Ukraine and its neighboring countries.[9] According to the World Bank’s 2022 Commodity Markets Outlook, the increased pressure on the fertilizer markets and its key suppliers may open the door for emerging industries to become more significant players in supplying global demand for fertilizer.[10] Brunei, India, and Nigeria each have budding fertilizer industries, and could enter the global market as others protect their supply. This could potentially ease some demand problems around the world, though if essential inputs to fertilizer production remain at high costs, the final product costs will continue to remain high as well. For businesses in the food and agriculture industries, awareness of downstream costs as a result of the shortage is essential. Non-energy commodity prices, including those in the agriculture industry, are likely to increase in the latter half of 2022 by a forecasted 20% before they settle in 2023.[11] Commodity prices in the energy industry are projected to increase by approximately 50% in 2022, affecting those industries reliant on high quantities of energy for production.[12] The increase will also keep fertilizer prices high, affecting yields of agriculture products in the coming seasons. Isabella Gabriele [email protected] [1] Impacts and Repercussions of Price Increases on the Global Fertilizer Market USDA (30 June 2022) [2] Joint Statement: The Heads of the World Bank Group, IMF, WFP, and WTO Call for Urgent Coordinated Action on Food Security World Bank (13 April 2022) [3] Impacts and Repercussions of Price Increases on the Global Fertilizer Market USDA (30 June 2022) [4] The war in Ukraine is fueling a global food crisis. Reuters (30 May 2022) [5] Impacts and Repercussions of Price Increases on the Global Fertilizer Market USDA (30 June 2022) [6] More than 30 GOP lawmakers urge Biden to end fertilizer duties InsideTrade (15 July 2022) [7] ITC: U.S. industry not harmed by fertilizer from Russia, Trinidad and Tobago InsideTrade (18 July 2022) [8] Indonesia calls for G20 joint ministerial forum to tackle food crisis Reuters (15 July 2022) [9] World Bank to offer $30 bln as Ukraine war threatens food security Reuters (18 May 2022) [10] Commodity Markets Outlook April 2022 World Bank (30 April 2022) [11] Ibid [12] Ibid Comments are closed.
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