The International Fertiliser Association (IFA)
Fertiliser is not just a UK purchase, the market is global and market-driven, determined by the balance between supply and demand, this is then underpinned by production costs. To confuse the issue prices also vary with agricultural seasonality and the timing of fertiliser purchases within a year.
Strong demand – Global.
Demand has reached record levels driven by a strong emphasis on food security and government support to the agricultural sector. It is also driven by globally strong crop prices which have increased the incentive to plant additional acreage and increase fertiliser use to maximise yields.
Production has been severely impacted by disruptions with several production plants closing due to factors such as weather events or high input costs. This prevented producers maintaining the levels of supply required to meet market demand. Consequently, the availability of fertilisers has fallen below global requirements.
High raw material prices
The production processes of several key fertilisers are energy-intensive or energy-linked.
In the nitrogen industry, energy accounts for around 70-80% of the total cost of production for ammonia.
The phosphate sector is also exposed as it uses ammonia and sulphur as raw materials.
Energy prices have spiralled in 2021 in response to tight supply and ever-increasing demand, significantly increasing the operating costs of many fertiliser producers around the world.
In response to reduced fertiliser availability, several governments have implemented policies to protect domestic supply of fertilisers. Fertiliser supply is often deemed a matter of national importance, given its impact on crop yields and in turn on food supply. These policies have reduced or capped fertiliser export potential in major suppliers to the global market including China, Russia and Egypt. This has further tightened the global fertiliser market.
The fertiliser market has been impacted by geopolitical disruptions in 2021. The most significant is the imposition of economic sanctions on Belarus by the EU and the US. Belarus supplies almost one fifth of the world’s potash, and is the third largest exporter. Potential removal of potash supply from Belarus has prompted an uncertainty in the market given the country’s contribution to global supply.
Taken From: The International Fertiliser Association (IFA) report, Short-Term Fertiliser Outlook 2021-2022.”