Soaring fertilizer prices put global food security at risk
The rolling crises of the past few years rendered visible so many vital commodities that plenty of us never gave much thought — nickel, silicon chips, lumber. The latest entrant into this camp: Fertilizer.
Why it matters: Skyrocketing fertilizer costs — like those made from nitrogen, phosphorus and potassium (NPK) — are driving up food prices and, worse, threatening food security around the globe.
State of play: Prices for NPK were up 125% in January from a year before, and rose another 17% from the beginning of the year to March, according to data compiled by the International Food Policy Research Institute (IFPRI).
- The looming European ban on Russian natural gas (a critical component in manufacturing some fertilizers) could worsen the situation.
- "We're in a dire situation right now," said Svein Tore Holsether, the CEO of fertilizer maker Yara International, at a seminar hosted by IFPRI this week.
- If farmers use less fertilizer, they can't produce as many crops — and that raises the specter of "malnutrition, political unrest and, ultimately, the otherwise avoidable loss of human life," Bloomberg reported.
The big picture: Prices for these heavily traded raw materials were already rising in 2021, because of a myriad of factors: Hurricane Ida in the U.S., an upsurge in demand after the pandemic, supply chain issues, and rising natural gas prices that predated the war in Ukraine.
Then, two things made that worse:
- China: The country, which supplies 24% of the world's phosphates, 13% of nitrogen and 2% potash, halted fertilizer exports this past summer.
- War: Russia's invasion of Ukraine disrupted trading in the Black sea, putting the global food supply in peril generally (for instance, the wheat disruption). Russia and its ally Belarus also produce a lot of fertilizer. In 2020, Russia provided 14% of urea (a nitrogen fertilizer), and, with Belarus, 41% of potash, a potassium fertilizer.
Of note: Fertilizer is a heavily traded product, meaning most countries — even the ones making lots of food — import their supply.
- Three-quarters of countries in the world depend on imported fertilizer for 50% or more of their fertilizer use, IFPR notes.
- Some countries, including Mongolia, Nicaragua and Ecuador are at the mercy of Russian and Chinese policies with the majority of their fertilizer supply cut off.
The bottom line: In richer countries, we'll continue to see higher food prices, and in more vulnerable countries things could grow desperate.