Headache over soaring fertiliser prices

Ben Riensche, who farms 16 000 acres in Iowa, would be ecstatic to get US$80 per acre selling his corn.

But it'll cost him US$240 an acre to feed the plants with nitrogen, triple what he's used to paying. And that's not counting what he'll spend on two other important fertilisers, phosphate and potash, which he says have each doubled in price since he purchased supplies for his 2021 crops.

Pandemic-induced supply bottlenecks and the rising cost of natural gas, a key production input, are among the factors sending fertiliser prices soaring. Add disruptions stemming from Russia's invasion of Ukraine, and consumers will be paying more for almost every plate of food.

"You think they squawk about having gas go from three to four dollars a gallon?" says Riensche. "Wait until the grocery bill is US$1,000 a month."

Russia is a major low-cost exporter of many kinds of crop nutrients. "No other nation has the same breadth of readily exportable fertiliser supply," says Alexis Maxwell, an analyst with Bloomberg's fertiliser analysis and news publication Green Markets. "Their fertilisers move to all continents."

It's hard to overstate the importance of fertiliser. The advent of synthetic ammonia fertilisers about a century ago is widely credited for helping food production keep pace with global population growth, freeing humankind from its Malthusian constraint. In that time, the planet's population has gone from 1.7 billion to 7.7 billion, largely thanks to enormous growth in crop yields. Some experts have estimated that the global population might be half of what it is today without nitrogen fertiliser.

If the global trade in fertiliser is further disrupted, it will mean higher costs for farmers across the globe, and in turn more food inflation at a time when global food prices have already been hitting record highs. Prices for the widely used nitrogen fertiliser urea in New Orleans surged 29 percent from the previous week- a record for the 45-year Green Markets index- after Russia invaded Ukraine. They were already sky-high, thanks to a gas crunch in Europe that has forced some producers to dial back production or, in some cases, close. That's on top of elevated freight rates, increased tariffs, extreme weather, and sanctions on Belarus, which accounts for about a fifth of the global supply of the mined nutrient potash.

"We could be tightening fertiliser supplies ahead of the North American growing season, and that would impact a whole year's global production," says Arlan Suderman, chief commodities economist at financial-services network StoneX.

Major buyers of Russia's plentiful fertiliser supplies are scrambling for product. In Brazil, the world's top importer of fertiliser, coffee cooperative Minasul logged sales equivalent to 20 million reais (US$4 million) on a day soon after the invasion, says its president, Jose Marcos Magalhaes. It usually sells from 2 million to 3 million reais in agriculture inputs, such as fertiliser and pesticides, daily.

In the US, Iowa's attorney general has commissioned a market study on the "unprecedented" increase in fertiliser prices, while US Department of Agriculture Secretary Tom Vilsack has warned fertiliser companies and other farm suppliers against taking "unfair advantage" of the Ukraine conflict to indulge in price gouging.

Riensche, the farmer in Iowa, says it's only a matter of time before the rest of America becomes intimately acquainted with the price dynamics of a commodity previously taken for granted. "You're gonna have a stunning reality," he says.