Global fertilizer prices have risen to multi-year highs in the past few months, after prices of key feedstocks for natural gas and coal rose, and certain export restrictions put in place by supplier countries .
Natural gas is used worldwide as a raw material, as well as a fuel for the production of nitrogen fertilizers, and in some countries such as China, coal is converted to gas into ammonia and used in the manufacture of fertilizers .
China and India ban fertilizer exports
Since September 2021, China has banned the export of phosphate fertilizers to ensure that domestic supply supports fertilizer prices. Russia also banned fertilizer exports soon after. China, India, the United States and Brazil are the world’s largest consumers of fertilizers and are also major producers of agricultural products .
China, the world’s largest fertilizer supplier, has banned fertilizer exports and urged coal and natural gas companies to honor contracts signed with domestic fertilizer producers .
India imports an average of 60% of 10-12 million metric tons of its annual consumption of DAP, according to a Reuters report issued in early December, with 40% of this coming from China .
Expectations of an increase in the demand for fertilizers
As India enters winter or spring planting season in November, the demand for fertilizers in the country is likely to reach its peak .
The Reuters report indicated that there have already been cases of Indian farmers facing delays or disruptions in the supply of fertilizers .
S&P Global Platts data showed that the contracted LNG supply of 24.3 metric tons/year covers just over half of India’s gas-to-gas regasification capacity each year, indicating that the country has a relatively large exposure to imports. Topical liquefied natural gas .
Expectations of a decline in the production of the largest corn-producing country
According to Standard & Poor’s Global Platts, due to the high natural gas prices in Europe, many fertilizer companies were closed, which led to supply concerns .
In the United States, input costs for farmers have risen at high fertilizer prices, noting that the United States is the largest producer of corn in the world and corn is a fertilizer-intensive crop .
US corn farmers have talked about switching to different crops such as soybeans or reducing their fertilizer use in the next growing season, if prices continue to rise .
Besides the high prices, there are also concerns about the availability of fertilizers, which are likely to affect agriculture. If farmers reduce fertilizer use due to a lack of supply, this may eventually lead to stress on yield and production .
Standard & Poor’s Global Platts said that if natural gas prices continue at current levels or rise, agricultural prices, especially corn, will need to remain high to maintain the required acres and again, this will lead to higher food prices .