Fertilizer prices have risen more than 100 percent for all major nutrients required for crop production since September 2020, potentially risking the long-term viability of American farms and further increasing the cost of food to US consumers.
Between September 2020 and the end of 2021, the price of ammonia increased 210 percent, liquid nitrogen increased 159 percent, urea 155 percent, monoammonium phosphate (MAP) 125 percent, diammonium phosphate (DAP) over 100 percent, and potash rose 134 percent on average across the country.
“At a time when COVID-19 already decimated the lives and livelihoods of untold millions, soaring food costs are hitting the poor especially hard. This raises the risk that higher fertilizer costs will not only hit farmers but will also be passed on to consumers via higher food prices,” said HSBC Frederic Neumann, co-head of Asian economics research.
The price hikes are being blamed on the “soaring prices for the natural gas used to produce them, and severe storms in the United States that disrupted production,” per Reuters reports, while experts disagree with the assumption there is a shortage of fertilizers.
“There is fertilizer in the United States. It is expensive primarily due to fluctuations in the world energy market, which influences price,” stated Kreg Ruhl, senior market manager of Growmark, an Illinois-based agricultural supply cooperative.
Ruhl argued that the costs are related to the soaring costs of all commodities, and has nothing to do with global supply chain shortages. Estimates suggest that all commodities have risen an average of 12 percent since 2020.
On average, farmers in the US operate within a very low profit margin of 11.3 percent. Soaring costs of their most essential nutrient — nitrogen — could render many farmers in the red by the end of 2022.
China is the largest exporter of urea nitrogen fertilizer and phosphates, essential components for successful agricultural crop returns in the US. In 2021, China suspended fertilizer exports amid similar reports of “tight supplies.” Agricultural experts estimate that for every 30-day cycle that China refuses to export nitrogen, world nations lost 380,000 tons of nitrogen for the 2022 growing season.
Many Chinese fertilizer companies have banned exports of phosphates until at least June 2022, well into the American growing season, claiming that they need to guarantee their domestic supply to feed a rapidly growing population.
The ban was described as a “trade war” by Vice President of Agronomy at Michigan Agricultural Commodities, You’ve got a supply-restricted market today. Ten to twelve years ago, you had a demand-led market with some supply constraints. Logistics is a mess, but I feel pretty comfortable that we’re going to have the supply in the U.S. It’s just — at what price?” per reports from Norge Mining.
The last time China hiked up prices of fertilizer supplies to the US was in 2008, coincidentally the last time they hosted the Olympics. Prices of essential nutrients increased between 32 and 100 percent, applying further pressure in the lead-up to the 2008 Global Financial Crisis.
Despite cries of supply shortages, China leads the market in controlled-release fertilizers, and industry expected to reach a value of $3.3 billion by 2026. Because American farmers have been dependent on nitrogen and phosphate fertilizers since the 1950s, switching to controlled-release fertilizers poses storage limitations and a lack of flexibility related to weather and precipitation fluctuations.
