What is the war doing to fertilizer prices?

Tom Vilsack, the US Secretary of Agriculture, calls the fertilizer market - and especially prices - his biggest concern. He did that during one press conference last week. Farmers in the US and many other countries are not in a jubilant mood despite high grain prices. On the other hand, there are sharply increased inputs such as fertilizer. Now that Russia has invaded Ukraine, this is causing prices to rise again.

Danger in gas prices
The greatest danger for Europe lies mainly in gas prices and the supply of Russian gas. Nitrogen is produced from this in our country at Yara and OCI, for example. The gas price is a determining factor for many things and that also applies to fertilizer. Russia supplies two-thirds of the natural gas used in Europe.

For the time being, we have not noticed much tension in the fertilizer market in the Netherlands. Prices are at a stable high level for, among other things, calcium ammonium nitrate (such as Nutramon) and triple superphosphate. Farmers and traders are more concerned about whether all fertilizer can be delivered on time. This is not yet an issue for the first gift - which is now being carefully sprinkled on the winter grains. It becomes critical, especially later in the season. That said also Triferto director Kai Kikkers Boerenbusiness TV.

Ammonium nitrate
On a global level the situation is different. The cheap fertilizer ammonium nitrate is widely used worldwide. Not only in agriculture, but also for the production of explosives. That is precisely why this fertilizer is controversial and is therefore not stored or used in the Netherlands. In early February, Russia banned the export of ammonium nitrate. This has consequences worldwide, including for the US. The price there has already risen by 29% since the invasion.

The war is yet another problem facing the fertilizer market. Countries such as Russia and China have imposed export restrictions or bans. The use of potash from Belarus is banned, freight costs are still sky high and production and port facilities worldwide have had to deal with extreme weather such as hurricanes. All these factors play a role in driving up the price.

The consequences
For the Netherlands, the danger mainly lies in the price and availability of Russian gas. Russian LNG still flows to Europe, but for how long? The opening of the controversial Nord Stream 2 pipeline has also been suspended by the Germans. In any case, the costs of nitrogen production in particular are increasing. If there is a gas shortage, the industry is obliged to sell gas to citizens, for example. In any case, prices remain high and are likely to rise steadily under the current scenario.

The course of this spring also influences the market. We can no longer speak of a very early spring and that gives distributors time to build up stock and deliver products. Any breaks in the logistics line will only become apparent later this season. Not only in Western Europe, but also in the Black Sea region where ports and waterways are (or could be) blocked.

The situation is different worldwide. For example, the US – but also South American countries – fear a shortage of fertilizer, or at least a reduced availability. This creates hoarding behavior on the market and drives prices up again. Brazil is the largest fertilizer importer in the world. The day after the invasion, the Brazilian cooperative Minasul sold $4 million worth of fertilizer, crop protection and more, compared to normally $190.000 to $390.000 a day.

Less yield, more expensive food
That is also where Vilsack's fears come from. If not enough fertilizer is available, this will ultimately result in lower crop yields. At the same time, the high prices are reflected in product prices and ultimately also on the consumer's plate. In Russia and Ukraine themselves, analysts are not yet immediately taking into account a significantly lower yield. It is possible that companies will use slightly less fertilizer, but this will not have a major impact.