Fertilizer tightness seen lasting into at least 2023, forcing world farmers into bidding wars

Farmers worldwide seeking to secure fertilizer for the next two years will have to outbid rivals or otherwise miss having enough to support crops, executives of a leading U.S. fertilizer supplier said in November.

Image courtesy of Shawn Konopaski/Pixabay

“High crop prices and increased economic activity continue to drive demand. Meanwhile, lower global production and government actions have created a supply constrained global market,” said on Nov. 4, 2021 Bert Frost, vice president for sales and supply chain at CF Industries.

“We expect strong global fertilizer demand to last into at least 2023,” he said.

Relief is “unlikely to appear anytime soon,” he added, in comments during the Deerfield, Illinois-based company’s third quarter 2021 earnings call, according to a Motley Fool’s transcript.

India and Brazil

Frost said global fertilizer production has been constrained in 2021 in part by weather events in North America as well as lower supplies due to increased maintenance.  

On the other hand, internationally, global demand has been steadily on the rise, with Brazil and India taking tonnes away from other regions.

“The demand is definitely there,” Frost said.

“You are seeing India desperately trying to pull in tons and will continue to do so through, I expect, into their next fertilizer year, which begins in April. Brazil is ahead 10T year-on-year and probably will continue at that pace through importing urea at least through February,” he added.

China and Russia

China and Russia have contributed in 2021 to the tightening of the world’s fertilizers markets by limiting exports and this could have consequences for many countries in coming years, Frost said.

The “Russian and Chinese governments are discouraging nitrogen fertilizer exports through the spring. These factors suggest the potential for strong fertilizer demand to last beyond 2023,” he said.

An inability to secure enough product may result in lower crop yields, he said.

“If this were to happen, demand would be deferred into future years as it would take more than two growing seasons to replenish global grain and oilseed stocks,” he said.

Fertilizer prices

“We started the year at $350 per ton of urea, moved to $400 by April, moved to $500 by July, $600 in September and $700 in October. And you can see in the publications, we started our fill program in July at $285 NOLA equivalent and then moved to $435 in September and then in October, $535,” he said.

“The Chinese announcement is much more significant, because of what has come out traditionally from China, the four million to five million tons of urea exports and also phosphates,” Frost said.

“In a world of 50 million tons of world traded urea, to take out up to 10% is going to be felt, on top of the demand, as I mentioned earlier, from Europe that needs to move. So you are going to see North African tons moving into Europe. And there's going to be a hole,” he added.

As for the Russia announcement, it was “a little bit of a surprise,” he said.

“Russian demand for nitrogen fertilizer has been fairly consistent in that 5.5 million to 6.5 million tons demand per year,” he said.

“And they've exported the remainder. And so when you look at from year-on-year what Russia has consumed and what Russia has exported, on the margin, there's probably going to be a shortage of up to 0.5 million tons,” he added.

Fertilizer bidding competition

CF Industries CEO Anthony Will shared during the same call the company’s expectation “that there's going to be availability of product here in North America,” according to a transcript of the call by Motley Fool.

“The U.S., based on crop prices and efficiency of growers and requirements on the industrial side, is able to bid away tons from other parts of the world that are less able to do so, particularly those economies that require government subsidies in which to bring tons in,” he said.

The fertilizer shortage and the possibility of lower crop yields may also contribute to inflationary pressures.

“I see a situation where you end up with inflation in terms of the industrial goods as opposed to some reduction in economic output,” Will said.

In August, the U.S. International Trade Commission probed fertilizer imports.

According to figures published in a Dec. 2 press release by the Food and Agriculture Organization, as of Sept. 2021 161 million people in the world were experiencing “high acute food insecurity”, an increase from 155 million in the previous year, after the pandemic intensified an existing problem.

By Renzo Pipoli