China bans phosphate fertilizer export

Only 35 countries have phosphate reserves. Of these, 90% are located in just six countries. After Morocco - which has three-quarters of the world's phosphate supply - China is the largest producer. It accounts for 25% to 30% of world exports of this fertilizer. The fact that the Chinese government is imposing a ban until June 2022 is disastrous for price formation.

Chain of problems
The fertilizer market is plagued by a series of problems. In Europe this is mainly the sky-high gas price. Three quarters of the production costs of nitrogen are made up of natural gas. Cutting back production pushes the price up further. Phosphate and potash – extracted from mines – are also rising sharply in price. The latest news about the Chinese export ban does not help.

It is unknown exactly how much phosphate fertilizer the Netherlands imports from China. In 2018 imported The Netherlands for €113 billion worth of goods from this country. That is 15% of the total import. Three quarters of this is exported to other countries. This also applies to imported fertilizer. The fertilizer item comprises 5% of total Chinese imports. About half of this is exported further into the EU. In 2019, the Netherlands' total fertilizer imports amounted to 3,33 million kilos. Import or not, the news has a major impact on price formation. Agricultural entrepreneurs who have to order fertilizer this winter or next spring also notice this.

Perfect storm
Normally other producing countries absorb a shortage. That is a difficult story at the moment. In Europe it is the sky-high gas prices and the US is still struggling with logistical problems due to the hurricane season. Every country has its own problems. Analysts therefore speak of a perfect storm or black swan. An unexpected event that no one saw coming. The latter term can be traced back to a Dutch one discovery in 1696.

There is no single cause for the price increase on the fertilizer market. It involves a series of problems. This last happened in 2008, when China organized the Olympic Games. Coincidentally, the country will host the Winter Games in 2022. Prices are not yet at 2008 levels. "Then the urea price reached a level of $825 per tonne," says analyst Josh Linville of market agency StoneX Group. "The situation was different then. We started at a higher level and the market was mainly demand-driven. Supply was not a problem. The question now is: what price are you willing to pay?"

Consequences for area
The price level of fertilizer has major consequences on all fronts. Linville sees no chance of price drops until the first quarter of next year. He does not believe the energy markets will be able to recover until the spring. This in turn has consequences for the area. In the US mainly corn versus (soy) beans. The former requires considerably more nitrogen and fertilizer. Do arable farmers opt for a less fertilizer-hungry crop, and thus miss opportunities for high sales prices? Another consequence is that the high input costs are ultimately passed on in food prices. Consumers in the supermarket will also notice this.

Worldwide, 2022 will also be a very turbulent year. Analysts all agree on that. High transport costs and difficult availability of containers, high energy prices and high product prices are just a few factors. This has major consequences for the agricultural sector. In the Netherlands, companies can afford the fertilizer and do not skimp on it. Things are different for a farmer in Africa, Asia or even Eastern Europe. Yet here too, the following applies: who will reimburse these costs? Seen in that light, animal manure could become very popular next season. An alleged phosphate surplus quickly results in shortages, especially with a sharply declining livestock population and number of livestock farms.

Also read: '2022 one of the toughest years in terms of inputs', about an analysis by Rabobank that shows that the availability and costs of crop protection products are also a sensitive issue.