Global fertilizers costs have skyrocketed to record highs in a perfect storm of events, including extreme weather, plant shutdowns and government sanctions. The energy crises in Europe and China are exacerbating the impact because of the importance of coal and natural gas as feed stocks. China is also implementing new regulations aimed at exporters in an attempt to protect domestic supply.
In an interview now being quoted across news outlets, Pramote Charoensilp, president of the Thai Agriculturist Association, was quoted as saying “A ton of fertilizer is now more expensive than a ton of rice.” Fertilizer accounts for as much as 70% of the production cost of rice and corn. But increasing fertilizer costs will impact more than just these staples.
Expensive fertilizer could push U.S. corn farmers’ cost of production 16% higher, according to Bloomberg’s Green Markets.
“A sharp run-up in fertilizer prices will be a source of pain for farmers, but producers and consumers should keep the situation in perspective, said David Widmar, an agricultural economist and co-founder of Agricultural Economic Insights, a research firm.”
The bottom line is that based on price expectations, corn still looks like a much more profitable bet for producers, said Widmar, who expects to see an increase in planted corn acres in 2022 despite rising nitrogen costs.
In a more narrow look at some of the specific impacts of the energy crunch in China, Bloomberg reported that, “In recent weeks, several plants were forced to shut or reduce output to conserve electricity, such as soybean processors that crush beans to produce meal for animal feed and oil for cooking. Prices for fertilizer, one of the most important elements of agriculture, are skyrocketing, slamming farmers already buckling under the strain of rising costs.
“The processing industry is set to be more severely affected than staples such as grains and meat, Rabobank analysts wrote in a recent report.”
And in news regarding India, Bloomberg reported that, “India won’t increase subsidies on phosphorus-based fertilizers and has directed producers to refrain from raising prices, according to people with knowledge of the matter, threatening the firms’ margins as global costs of the raw material surge.”
“Prices of phosphoric acid and ammonia, used to make the soil nutrient, have soared in the world market due to tight supplies, putting pressure on Indian producers as they import a majority of their requirements,” the Bloomberg article said.
“The rising price of oil on global markets, and the weak real, have also driven fuel prices higher, and truckers, farmers and other users of diesel fuel and gasoline are passing their higher costs along to consumers,” the Dow Jones article said.
Source: Glowlit & Bloomberg