CHICAGO, March 23 – Sky-high fertilizer prices are prompting farmers around the world to cut consumption and reduce the area they plant. This comes in the wake of the Ukraine-Russia conflict, which has seen some agribusiness veterans warn of food shortages.
Western sanctions against Russia, a major exporter of potash, ammonia, urea and other soil nutrients, have disrupted global shipments of these key commodities. Fertilizer is key to keeping corn, soy, rice, and wheat yields high. Breeders are trying to adapt.
The pivot can be seen in the agricultural powerhouse of Brazil, where some farmers are applying less fertilizer to their corn and some federal lawmakers are pushing to open protected indigenous lands to potash mining. In Zimbabwe and Kenya, small farmers are once again using manure to feed their crops. In Canada, a canola farmer has already stockpiled fertilizer for the 2023 season in anticipation of even higher prices.
Farmers elsewhere are taking similar steps. Reuters spoke to 34 people on six continents, including grain producers, agricultural analysts, traders and farming groups. All expressed concern about the cost and availability of fertilizers.
In the United States alone, fertilizer bills are expected to rise 12% this year after rising 17% in 2021, according to data from the American Farm Bureau Federation and the US Department of Agriculture (USDA).
Some growers are considering switching to plants that require fewer nutrients. Others plan less acreage. Others say they will simply use less fertilizer, a strategy that experts expect will hurt yields. Production is most at risk in developing countries, whose farmers have fewer financial resources to weather the storm, said Tony Will, chief executive officer of Illinois-based CF Industries Holdings (CF.N), a leading maker of nitrogen fertilizers.
“My concern right now is actually a food crisis on a global basis,” Will told Reuters.
On Saturday, Peru declared a state of emergency in its agricultural sector over fears of food insecurity.
The decree says the country’s planted areas have fallen 0.2% since August due to rising fertilizer prices and that the volume of Peru’s grain imports for animal feed has also fallen due to cost concerns. The government is now drafting a plan to increase the country’s food supply.
DOUBLE BLOW
Global fertilizer prices were already high before Russia’s invasion of its neighbor on February 24, as record natural gas and coal prices forced some fertilizer makers to curb production in the energy-hungry sector. Ukraine’s cities have been besieged by missiles, tanks and troops in what Moscow has called a “special operation” to demilitarize the country. Russia denies attacking civilians in the conflict.
Western nations responded with tough economic sanctions against Russia, while the United States and European Union imposed fresh sanctions on Belarusian President Alexander Lukashenko, who backed the Russian offensive.
Together, Russia and Belarus accounted for more than 40% of global exports of potassium last year, one of the three critical nutrients used to boost crop yields, Dutch lender Rabobank said this month. In addition, Russia accounted for about 22% of world exports of ammonia, 14% of world urea exports and about 14% of monoammonium phosphate (MAP) – all major types of fertilizers.
Sanctions have disrupted sales of fertilizers and crops from Russia. Many Western banks and traders are avoiding Russian shipments for fear of clashing with rapidly changing regulations, while shipping companies are avoiding the Black Sea region for safety reasons.
It all amounts to a double whammy for the global food supply.
Russia and Ukraine are major grain producers. Together they account for about 30% of global wheat exports and 20% of corn exports. Grain shipments through the Black Sea have already been disrupted. Stuck shipments from these two countries have helped boost global food inflation. The World Bank said last week that a number of developing countries are facing short-term wheat supply shortages due to their heavy reliance on Ukrainian exports. Continue reading
But the fertilizer crisis is in some ways more worrying because it could stifle food production in the rest of the world, which could help plug the gap, said Maximo Torero, chief economist at the UN Food and Agriculture Organization.
“If we don’t solve the fertilizer problem and the fertilizer trade doesn’t continue, we have a very serious problem [food] Delivery next year,” Torero told Reuters.
BRAZIL IN DANGER
Brazil, the world’s largest exporter of soybeans, relies heavily on imported fertilizers like potash, which accounted for 38% of plant nutrients used last year. Russia and Belarus were the source of half of these shipments.
Even before the Ukraine-Russia conflict, Brazilian farmers reduced corn cultivation due to rising fertilizer prices. Soybean cultivation is also likely to be affected as growers are expanding at a slower pace than in previous years, according to Agroconsult, a Brazilian agriculture consultancy.
In the west-central state of Mato Grosso, farmer Cayron Giacomelli told Reuters he has already reduced fertilizer use for his current corn crop. He said he will do the same when he plants soybeans later this year, a move he believes could shrink his crop by at least 8%.
Giacomelli said fertilizer is hard to come by and some traders won’t complete sales until cargo ships dock in Brazil. He’s still kicking himself for not completing a purchase he negotiated just before Russia invaded Ukraine. “I got distracted and now I’m paying more,” Giacomelli said.
Meanwhile, lawmakers from Brazilian farm states are pushing for laws that would open up indigenous lands in the Amazon to potash mining. This measure is opposed by members of the local Mura tribe, who say mining would destroy the natural habitat they depend on. The bill is still on its way through the nation’s Congress. Continue reading
In Zimbabwe, scarce and expensive imports have forced corn farmers like Boniface Mutize to make their own fertilizer. “We mix cow manure or chicken waste with zinc,” he said.
It is the same in rural Kenya. Farmer Mary Kamau said she too has cut back on purchases of commercial fertilizer and uses manure to feed the coffee and avocados she grows on 12 acres in Murang’a County. She fears 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 – not just this season,” said Kamau.
LESS HECTARES, LESS FERTILIZER
In the United States, Mike Berry, a fifth-generation farmer from New Mexico, has similar concerns. He recently paid $680 a ton for liquid nitrogen to fertilize his corn crop, an “exorbitant” price that was 232% higher than last year’s price.
Berry said he plans to reduce his spring plantings of forage corn to about 300 acres from his usual 400 to 600 acres. Berry said it will also reduce its use of liquid nitrogen by about 30%, which could reduce its yields by 25%.
Conclusion: “We will produce less,” he said.
That may seem short-sighted given that commodity prices have risen sharply in recent weeks. But the cost of growing crops outweighs the potential revenue for many farmers.
“Cultivation decisions are increasingly being made based not on market fundamentals, but on production costs, which are driven by price and fertilizer supply,” dozens of U.S. lawmakers wrote in a March 17 letter to the U.S. International Trade Commission. They called for an exemption from tariffs on fertilizer imports from Morocco and Trinidad and Tobago.
US farmer Don Batie described the stressful process of sourcing enough fertilizer for this year’s sowing.
“It’s crazy,” said Batie, who grows corn and soybeans on 1,500 acres in Lexington, Nebraska. “Until they get a price and give it to you, the price changes.”
WHERE TO BUY?
Asia is also struggling.
India, which imports fertilizers for its vast agricultural sector, is increasingly turning to Canada and Israel to replace its Russian supplies. Continue reading
Thailand, meanwhile, is under pressure for its signature rice crop. Russia and Belarus accounted for about 12% of fertilizer imports last year, Thai government data show. But buying from elsewhere could prove difficult, in part because domestic fertilizer price controls are putting pressure on Thai importers as world prices skyrocket, according to Plengsakdi Prakaspesat, president of the Thai Fertilizer and Agricultural Supplies Association.
“If you’re a trader and you’re absolutely going to lose money, are you going to import any more stuff?” said Plengsakdi.
China imposed fertilizer export restrictions last year to protect its own farmers as global prices soared on strong demand and high energy prices. Beijing was expected to ease those restrictions this year, potentially boosting global supply, said Gavin Ju, senior fertilizer analyst at commodities consultancy CRU’s Shanghai office. But he said that is less likely now that the global market is in chaos.
Concerns about rising inflation and a protracted war in Ukraine have some farmers planning far ahead.
Corn and canola farmer Bert Peeter in Manitoba, Canada, recently agreed to spend more than CA$500,000 to buy 80% of the fertilizer he needs by 2023.
This “may not be over after a year,” Peeter said.
Reporting by Tom Polansek in Chicago and Ana Mano in Sao Paulo; Additional reporting from Dominique Patton and Emily Chow in Beijing; Patpicha Tanakasempipat in Bangkok; Marcelo Rochabrun in Lima; Nelson Banya in Harare; Ayenat Mersie and Duncan Miriri in Nairobi; Gus Trompiz in Paris; Michael Hogan in Hamburg; Sonali Paul in Melbourne; Edited by Caroline Stauffer and Marla Dickerson