Soaring fertilizer prices add to inflationary pressures and food security concerns
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This blog is the fourth in a series of nine blogs on commodity market developments, elaborating on themes discussed in the October 2021 edition of the World Bank’s Commodity Markets Outlook.
Near-record high fertilizer prices.Prices have been driven by surging energy costs, supply curtailments, and trade policies. High fertilizer prices could exert inflationary pressures on food prices, compounding food security concerns at a time when the COVID-19 pandemic and climate change are making access to food more difficult.
Surge in input costs. Surging natural gas prices in Europe resulted in widespread production cutbacks in ammonia—an important input for nitrogen fertilizers—while escalating thermal coal prices in China led to a rationing of electricity use in some provinces and forced fertilizer factories to cut production. Energy prices also increased in the United States as Hurricane Ida hampered natural gas production in the U.S. Gulf Coast and several large fertilizer companies had to declare force majeure as production was halted.
Trade policies.China’s exports of DAP (diammonium phosphate) and urea account for approximately one-third and one-tenth of global trade, respectively. Adding to supply concerns, Russia recently announced restrictions on nitrogen and phosphate fertilizer exports for six months, effective December 1, 2021.
Growing divergence in spot and contract prices.The global potash market may be subjected to further volatility following the imposition of sanctions on Belarus in August 2021 by several countries (including the European Union in June, and the United Kingdom, the United States, and Canada).
Outlook and risks. Urea prices are anticipated to decline marginally in 2022 as feedstock costs moderate. DAP prices are projected to remain elevated in the first half of 2022 on expectations of tight supply unless Chinese export restrictions are relaxed earlier than anticipated. MOP contract prices are forecast to surge in 2022 following significant increases in spot prices. Upside risks to the outlook include further supply disruptions while downside risks (especially in the longer term) include intensification of environmental policies restricting fertilizer use.
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This article interesting reading as we in this part of region are already experiencing major shortages which will be exacerbated by export restrictions being imposed by some countries.
We need more fertilizer manufacturers in Nigeria
Would love to continuously receipt updates concerning the fertilizer industry.
I think the big worry is the fall in cereal production in the western world as a result of this, plus the pressure on production from climate change may trigger very fierce food inflation next year.
Is there a risk this may cause political instability anywhere?
As a farmer I see the general reaction is a major reduction in inputs and hope for higher prices
Professor of Soil and Water Sciences and food security
Kindly advice on trending prices for Potassium Sulphate, Phosphoric acid, Ammonium Sulphate, potassium nitrate, magnesium Sulphate, Zinc Sulphate .