High fertiliser prices are set to impact planting decisions this year and next, according to a new report by the United States Department of Agriculture (USDA).
Russia’s invasion of Ukraine had exacerbated the already limited fertiliser supply situation, the 30 June Foreign Agricultural Service (FAS) report said, triggering import/export restrictions that would compound shortage concerns.
Global fertiliser prices are at near record levels and may remain elevated this year and beyond, according to the report, with fertiliser prices accounting for almost one-fifth of US farmers’ costs, with an even higher share for corn and wheat producers, at 36% and 35% respectively.
The USA is a leading producer of nitrogen and phosphorus, but also imports large quantities of potassium-based fertilisers, the report said. Although fertiliser prices started increasing last year, many US producers were able to avoid the surge in fertiliser prices caused by Russia’s invasion of Ukraine on 24 February, as fertilisers for 2022 plantings were purchased the previous year.
However, as the Russia-Ukraine war continues, rising fertiliser prices are expected to have a greater impact on domestic and overseas planting decisions next year, according to the report.
The report examined the global fertiliser landscape, with a focus on the three main macro-fertiliser groups – nitrogen, phosphorus and potassium (NPK) – and looked at: major suppliers; major users; major exporters and importers; the impact of Russia’s invasion of Ukraine; and discussed how the USA outlook compared to other countries.
“Global fertiliser demand remains strong. Some countries have reduced their fertiliser use since 2007, but many have continued to increase their crop nutrient use. While the USA’s share of global fertiliser demand has dropped from 20% to 10% since 2007, many of the emerging markets have stepped up their use of fertilisers,” the USDA said.
A surge in natural gas prices in the middle of 2021, particularly in Europe, had resulted in reduced production of ammonia – a key input of nitrogen fertiliser production, the report said.
Coal price increases in China also led to a rationing of electricity usage, causing some fertiliser production plants to lower production. This resulted in China imposing a quota on fertiliser exports - particularly phosphates - until June 2022, citing the need to ensure domestic availability and food security.
“China’s suspension of fertiliser exports significantly diminished the global supply,” the USDA said.
A range of factors have worsened existing supply chain disruptions caused by the COVID-19 pandemic, according to the report, including export restrictions introduced by Russia and China, plus international sanctions on Belarus and Russia – both major fertiliser suppliers.
Many countries had recently imposed restrictions on Russian imports, the report said, and Russia, in response, had introduced initial restrictions on nitrogen and complex nitrogen fertiliser exports until June 2022.
Since 23 May 2022, the Russian government had increased the current six-month quotas on some fertiliser exports, leading to an increase in nitrogen fertilisers by 231,000 tonnes to 5.7M tonnes, and a rise in complex or compound nitrogen-containing fertilisers by 466,000 tonnes to 5.6M tonnes.
A decree released on 1 June codified the Russian government’s intent to maintain fertiliser export quotas until the end of this year.
“Supply issues may contribute to elevated fertiliser prices for a prolonged period, as the conflict between Russia and Ukraine continues,” the USDA said.
