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Analysis – Global farmers face fertilizer sticker shock that could cut use, increase food insecurity risk

FILE PHOTO: A farmer spreads fertilizer in a rice field on the outskirts of Agartala
FILE PHOTO: A farmer spreads fertilizer in a rice field on the outskirts of Agartala, India, September 4, 2015. India could save about $1.8 billion in fertilizer subsidies this year thanks to energy prices. But the government of Prime Minister Narendra Modi, two sources said, has no plans to lift price controls, a reform that risks angering farmers. REUTERS / Jayanta Dey

December 9, 2021

By Emily Chow, Roberto Samora and Bernadette Christina Munthe

BEIJING / STAR PAULO / JAKARTA (Reuters) – Key crops, from Brazilian corn to Malaysian durian, are at risk after tight supplies and sky-high fertilizer prices sent farmers searching nutrients for crops, raising concerns about food security and global inflation.

Fertilizer costs have skyrocketed this year amid increased demand and lower supply as record natural gas and coal prices led to production cuts in the energy-intensive fertilizer sector. . Urea is up more than 200% this year while diammonium phosphate (DAP) prices have nearly doubled.

With global food prices at their highest levels in more than a decade, rising fertilizer costs will only put further pressure on food affordability, particularly in import-dependent economies. When the budget is stretched, there is little room for government subsidies, said Frederic Neumann, co-head of HSBC. of Asian economic research. (Graphic: Global fertilizer prices, https://fingfx.thomsonreuters.com/gfx/ce/zjvqkywnwvx/Fertiliser%20price%20chart.jpg)

“At a time when COVID-19 has devastated the lives and livelihoods of millions, rising food costs are hitting the poor hard,” he said. “This raises the risk that higher fertilizer costs will not only affect farmers but also be passed on to consumers through higher food prices.”

BETTER BEFORE IT’S BETTER

With the Food and Agriculture Organization (FAO) food price index at its highest level since 2011 – when high food prices helped fuel the “Arab Spring” uprisings – world farmers are struggling to increase the food supply.

But analysts say the tight fertilizer supply situation will worsen early next year. Farmers in Europe, North America and North Asia all need to step up their purchases before sowing the spring crop, while key producers China, Russia and Egypt have restricted exports to secure domestic supplies. .

Josh Linville, Director of Fertilizers at StoneX Group Inc., said: “Most urea stocks are now secured, meaning global producers will be ‘out of stock’ through January 1. . and they will be met by sizable global demand in Q1 as the US, Canada, Brazil, Europe, and Asia all move forward to purchase. ” (Graphic: Fertilizer Yield Chart, https://fingfx.thomsonreuters.com/gfx/ce/xmvjonrbnpr/Fertiliser%20output%20chart.jpg)

In response, farmers around the world are delaying their purchase or reducing their use of fertilizers to save money.

India and Egypt – both major agricultural economies – increased government subsidies in November, with India’s fertilizer ministry ramping up supplies to districts with low stockpiles to ensure availability. available for winter crops.

DO NOT CUT SPARED

So far, high crop prices have favored many growers, and some may switch from protein-hungry wheat and corn to soybeans next season. (Graphic: Fertilizer use in agriculture, https://fingfx.thomsonreuters.com/gfx/ce/xmpjonnkovr/Agri%20usage%20chart%20new.jpg)

But in 2022, some crops or farmers will not be spared, the sources said.

In Germany, farmers affected by rising prices are likely to reduce fertilizer use, which could reduce harvest volumes “depending on the scale at which this takes place,” said Bernhard Kruesken, general secretary of the association German agricultural association DBV said.

“Crops with higher production costs in the past months will be considered for seeding,” added Kruesken.

Brazil, the world’s top soybean grower and third largest maize producer, feeds 10% of the global population. The country has warned of fertilizer shortages next year that are expected to slow the expansion of soybeans, corn and cotton farms.

“Soybeans shy away in part because a lot of inputs have been bought (already), but the second corn crop of the cycle,” said Andre Pessoa, partner at Brazilian agribusiness consulting firm Agroconsult. will cope with the increase in fertilizer costs. . “For the 2022/23 cycle, I would say we will have some problems. I told the farmers that the problem is no longer the price. Now it is ensuring availability. ” (Graphic: Fertilizer Trade Chart, https://fingfx.thomsonreuters.com/gfx/ce/zdvxoxnqjpx/Fertiliser%20trade%20chart.jpg)

Even in North America, home to some of the world’s wealthiest farmers, growers have been delaying the purchases they normally make before spring planting, hoping for prices to drop.

SMALLER PEOPLE

While weather conditions, diseases, pests, and water availability are also important in determining how crops grow, fertilizer is one of the most powerful production factors a farmer has control over. .

But many growers, and especially the millions of farmers who produce a third of the world’s food, will have no choice but to reduce fertilizer use by 2022.

In Southeast Asia, which produces most of the world’s palm oil, growers are struggling with higher output costs with industry players seeing disruptions in fertilizer procurement and imports. lower export.

“Malaysia imports 95% of its fertilizer supply. Teo Tee Seng, CEO of agrochemical supplier Behn Meyer AgriCare in Malaysia, said fruit and vegetable production, including durian, will be hit harder than oil palm, as it requires Ask for a higher quality fertilizer.

Albertus Wawan, an oil palm grower in Indonesia who has cut fertilizer use by a third, will postpone the next application to January to save on usage costs for two months.

“Once the price of fertilizer goes up, it won’t go down,” said Wawan. “This is the challenge for farmers of the future.”

The recent drop in oil prices may provide some relief to fertilizer producers, but any future energy shocks caused by a sudden cold will drive food prices up, according to an FAO report in November. higher, according to a November FAO report.

“We need to understand that all policy measures that raise energy prices will increase food prices,” said Josef Schmidhuber, FAO Deputy Director of Trade and Markets. “This is not to say we don’t emphasize climate change mitigation measures, but we need to find ways to increase fertilizer efficiency… and rethink our energy policies in a critical way. seriously.”

(Reporting by Emily Chow in Beijing and Beijing editorial, Roberto Samora and Brad Haynes in Sao Paulo, Bernadette Christina Munthe in Jakarta, Michael Hogan in Hamburg, Chu Mei Mei in Kuala Lumpur, Helen Reid in Johannesburg, Sarah El Safty in Cairo, Polina Devitt in Moscow, Nidhi Verma and Mayank Bhardwaj in New Delhi, Gus Trompiz in Paris, Julie Ingwersen in Chicago; editing by Shivani Singh, Gavin Maguire and Gerry Doyle)

https://www.oann.com/analysis-global-farmers-facing-fertiliser-sticker-shock-may-cut-use-raising-food-security-risks/?utm_source=rss&utm_medium=rss&utm_campaign=analysis-global-farmers-facing-fertiliser-sticker-shock-may-cut-use-raising-food-security-risks Analysis – Global farmers face fertilizer sticker shock that could cut use, increase food insecurity risk

Bobby Allyn

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