IMPACT OF HIGHER COST FERTILIZER AND ANIMAL FEED

MANY QUESTIONS on what is the impact of higher fertiliser and feed costs to the food production and food sustainability in the world?. Concerns have been raised that increasing fertiliser prices could disrupt global food supplies. Maximo Torero, chief economist for the UN Food and Agriculture Organisation, has said if the fertiliser problem is not solved then the world will have a serious food supply problem next year. Ian Wright, former chief executive of the UK Food and Drink Federation, has also raised concerns, stating that there is no proper plan for a “scary” future with disrupted food supplies. Rising prices for non-food products could also cause farmers to shift production away from food produce. The Telegraph has reported that farmers may have to plant fewer crops for milling wheat and more for animal feed, which is “spiralling” in cost, as they are very likely to obtain a good price. Minette Batters, president of the National Farmers’ Union (NFU), has warned that this could “leave the bread market short” and argued that farmers should be incentivised to produce food. This article in "Anim Agriculture" we discussed about the impact of higher fertilizer cost and animal fees for animal husbandary in Malaysia.

Growers are also increasingly utilising crops to produce biofuels. Food companies and policy makers are calling for the easing of incentives for biofuel crops to increase global grain and vegetable oil supplies. The International Food Policy Research Institute has said that “now is not the time to be encouraging the conversion of food crops to energy through artificial policy incentives. Farmers are having to adapt their business model in response to high fertiliser prices. Ahmad Mahmud asa a commeria vegetable growers in Sengkang, TNGKk, Johor has said that farmers will need to make tough decisions on what to plant this lefy vegetables and chilli due to downsize production or reduce fertiliser usage, potentially reducing productivity. He has also said that higher prices mean greater risks for farmers, as they must make a greater risk for investment despite potential threats including weather and reduced future demand with no price guarantees. Theoretically in which plants need a multitude of nutrients to thrive. These are categorized into micronutrients, such as zinc and iron; secondary macro-nutrients; such as calcium and magnesium; and three primary macronutrients: Nitrogen (N), Phosphorus (P), and Potassium (K). Mineral fertilizers provide higher and more plant accessible nutrients, while organic minerals importantly also provide carbon, which contributes to healthy soils. While efforts to reduce nutrient losses to the environment must be continued and stepped up, it bears emphasizing that fertilizers play a crucial role in agricultural productivity. For long the world market prices for both food and fertilizer (here we focus only on N, P and K) increased significantly over the past year and a half and have climbed to even higher levels following Russia’s invasion of Ukraine in February 2023 hitting their highest levels yet in March. T (see figure 1, +125% from January 2021 to January 2022, +17% from January 2022 to March 2022) and never go down. While there is an immediate concern about the impact of high food prices on food security, especially in low- and middle-income countries, fertilizer price spikes and concerns about availability cast a shadow on future harvests, and thus risk keeping food prices high for a longer period. In this blog post, which draws on data from the new IFPRI fertilizer dashboard; IFASTAT, compiled by the International Fertilizer Association (IFA); and FAOSTAT, we discuss the underlying drivers of current high prices, explain why the global fertilizer market is particularly susceptible to shocks, and examine which countries are most vulnerable to fertilizer market disruptions. A subsequent post will explore short and medium term solutions to address the serious affordability and availability concerns.

The issue of rising prices in agriculture input since June 2020 are significantly affect many farmers including in Malaysia.. However, a combination of factors contributed to fertilizer price increases beginning at already towards the end of 2020. On the demand side, global mineral fertilizer consumption remained remarkably steady during the first year of the pandemic (+1.6% in 2019/2020 compared to the previous crop year); then demand surged by 6.3% in 2020/2021.The rebound of crop prices in 2021 contributed to this movement, since higher crop prices tend to increase fertilizer demand as long as farmers face favorable fertilizer/crop price ratios. On the supply side, the most important factor has been the sharp increase in the price of natural gas, used as both feedstock and energy source in the production of ammonia (a base material for N fertilizers) and which accounts for 70%-80% of ammonia production costs. Natural gas prices spiked, especially in Europe and in Asia. The large global fertilizer producer Yara announced in March that it was decreasing its European production capacity of ammonia and urea by 55%. In other factor, similarly issue on rising prices of coal in China, the main feedstock for ammonia production there, along with a phasing out of inefficient production capacity, have also led to reduced production, contributing to rising global fertilizer prices as well. High prices of both ammonia and sulfur, two important inputs for P fertilizers, have driven up prices of P fertilizers. High energy prices, strong demand and limited supply also drove up spot prices of potash in 2021 and into 2022 untuil 2024. Other supply side drivers, such as ongoing COVID-19 related bottlenecks in global value chains and the impacts of hurricanes on U.S. Southeast production centers reported have also disrupted production and transportation of both fertilizers and fertilizer inputs. The Ukraine conflict, the economic sanctions it triggered, and disruptions in the Black Sea trading routes have all further increased trade costs and uncertainty about Russian and Belarus exports as a particular problem for the international fertilizer trade. In 2020 Russia was providing 14% of globally traded urea (the most widely applied N fertilizer), 11% of MAP and DAP (the most widely applied P fertilizers) and jointly Russia and Belarus contributed a whopping 41% of all traded MOP (the most widely applied K fertilizer). Finally, as Europe faces continued shortfalls in natural gas sources, production costs will remain high for all fertilizer suppliers (except Russia) including for the US/ Europe and for Persian Gulf countries manufacturing N products. Why the global fertilizer market is particularly vulnerable to supply shocks.

All of these problems have been amplified by two factors: A large amount of fertilizer 38% of all N, 50% of all P and 80% of all K produced is traded on international markets, and the lion’s share of that trade derives from only a few countries (see figure 2). Since ammonia, the key ingredient in N fertilizers, is primarily produced using gas or coal as feedstocks, many countries could in theory manufacture them, but comparative advantage lies with countries with relatively lower gas or coal prices: In 2019, Russia, China, and Qatar together accounted for 33% (15%, 13% and 5% respectively) of N traded. The production of potash and phosphates is more concentrated due to the uneven distribution of source deposits: For phosphates, the top three exporters China, Morocco, and Russia represent 57% of global trade (25%, 18%, and 14% respectively), and for potash the market share of the top three reaches 80% (Canada: 39%, Russia 21%, and Belarus 20%). The role of Russia on N, P and K markets, in conjunction of Belarus for potash, is particularly important in the current crisis. In this context, export policies of key countries are critical in shaping market stability, and all eyes are on China to see whether it will lift export restrictions on N and P imposed in Oct. 2021 in April 2022. The export restrictions are not limited to China; IFPRI’s Food and Fertilizer Export Restrictions Tracker shows five countries have imposed such measures, collectively reducing the global trade of each individual nutrient by 20% (see the IFPRI fertilizer dashboard). These export restrictions are having serious impacts on a number of vulnerable countries: Mongolia, trapped between Russian and Chinese policies, has seen 98% of its fertilizer supply restricted, Nicaragua 80%, Ecuador 74%, Cote d’Ivoire 63%, Cameroon 60%, and Azerbaijan 43%, among others. Another issue is trade remedies, i.e., anti-dumping duties, applied by importing countries that can impact prices in those markets. Examples include remedies applied by the European Union, or the U.S. (already implemented on phosphates, and under consideration for urea ammonia nitrate (UAN). 

The issue on repercussions of record fertilizer prices, Clearly, countries depending heavily on fertilizer imports from Russia and Belarus or the dashboard for details by nutrient) face an immediate shortfall and will need to secure alternative sources from a very tight global market. If they are able to procure supplies from other exporting countries, greater distances and transportation rerouting will lead to additional costs, pushing fertilizer prices even higher, and/or lack of availability. With three quarters of countries depending imports for 50% or more of their fertilizer use, perturbations on world markets will spread fast, impacting countries that do not import directly from Russia or Belarus. These problems will spread in the coming months; ultimately all farmers around the world will be impacted. The price shock may be buffered for farmers in some emerging and developing countries that have fertilizer subsidy regimes in place (e.g., India, China, Bangladesh, and Ghana) but those regimes are going to place tremendous fiscal pressure on budgets already stressed by substantial government outlays during the COVID-19 epidemic. Relatively smaller markets especially many African countries face a particularly difficult situation, as producers and traders are likely to favor shipping limited supplies to larger markets. Given Africa’s still-limited use fertilizers an estimated average of 25 kg per hectare, a fraction of the global average, 121 kg/ha a decline in fertilizer use would lead to significantly reduced productivity for the continent, with potentially serious consequences for food security. Finally, many fertilizer manufacturing plants in Africa focus on blending imported components to deliver the required N, P, and K compounds required by local farmers. Canceled or delayed deliveries of only a single input, for instance potash, could disrupt an entire operation, depriving farmers of inputs for weeks or months, until alternatives are put in place (e.g., application of single nutrient). As conclusions, while risks around fertilizer availability and affordability will vary by country and region, farmers in many low income countries face potential hardship as the Ukraine crisis continues. If these challenges are not addressed, harvests will suffer, keeping pressure on food prices beyond the short run and adding to food security concerns in many developing countries. A subsequent post will examine a suite of potential steps related to plant nutrition to address the crisis in the short term and prepare for a more resilient and sustainable future.Thanks...

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M Anem,

elaka,

Malaysia.

(January 2025).