As global fertilizer supply tightens, countries look to Canada to help fill the void.
Right now, fertilizer prices are high. Why?
It’s because of hurricanes, drought, Covid-19, labour shortages, global supply chain snarls, Russia invading Ukraine, and even American and Canadian seeding and planting timeframes issues—starting in March in Texas, and moving 100 miles north each week. Early bird often gets the fertilizer.
A high price on a crop one year—sometimes because less of it grew to fruition due to drought—will entice farmers to grow more of it again the next year. Things change in the fertilizer market.
A key change within the global fertilizer market is the recent Russian Federation invasion of Ukraine, ably abetted by Belarus.
Russia and Belarus are both major suppliers of fertilizer to nations around the world. But because of the invasion, countries have imposed sanctions on the two conspiring countries which has, ironically enough, forced the rest of the world to fall upon its own petard. Add to that, earlier this year, China began to limit its exports abroad.
Yes, we disagree with the choice to invade Ukraine, so here are some economic sanctions preventing us from purchasing any goods you might want to sell—like fertilizer.
Like it or not, Russia is the world’s largest exporter of fertilizers, according to The Fertilizer Institute.
It accounts for 23 percent of ammonia exports, 14 percent of urea exports, 10 percent of processed phosphate exports, and 21 percent of potash exports.
Brazil annually consumes about eight percent of all the world’s fertilizer available, and as the fourth-largest fertilizer importer, it purchases 21 percent of it from Russia. The next three biggest importers from Russia are China at 10 percent; the US at nine percent; and India at four percent.
For China, it’s a lot, but all it must do is avoid exporting its own fertilizers and keep enough to make sure its farmers have enough to grow crops. Of course, by keeping its own fertilizers for itself, it creates issues from countries that were counting on it for their growing season.
It’s the butterfly effect in action.
China, as a political ally of Russia, is upset at Russia’s invasion of Ukraine, but could still barter or purchase with Russia to get its hands on all the fertilizer it wants. It is, unfortunately, a win/yuan situation for Russia’s mining sector and the China agricultural sector or China’s chance to line its pockets with always tolerated money.
If you did the math on the Russian fertilizer exports, you realize those four countries only account for 44 percent of the countries Russia exports to. Those other countries, not listed, are those within the continents of Africa and Asia. A lot of ‘em.
For Brazil, the US and India, it caused a supply chain issue.
Hopefully it doesn’t surprise you to know that India has a very large agricultural sector, in which 60 percent of the country’s workforce is employed.
All told, ag contributes about 15 percent to India’s $2.7 trillion economy. As of 2021, it is the world’s sixth-largest economy by nominal GDP (gross domestic product) and the third-largest by PPP (purchasing power parity).
Like any country wanting to grow crops, India requires fertilizer. Unfortunately, the country has placed most of its eggs in one basket.
To fertilize its crops—mostly rice, cotton, and soybean—it requires between four- to five-million tonnes of potash. One-third of its potash consumption was derived from Russia and Belarus.
India’s fertilizer minister Mansukh Mandaviya spoke to news outlet Reuters, explaining: “This time we have made advance preparations for kharif (summer sown crop) season. We need about 30 million tonnes of fertilizers and arrangements are in place.”
To compensate, India has made arrangements with other fertilizer supplying countries, such as Canada and Israel. What those arrangements are, are being kept close to the vest by India.
Brazil? It received its last sanctions-free shipment from Russia via dozens of cargo ships on May 5, 2022. But that’s it.
Brazil has not yet made public any plans it has in the works to get hold of more fertilizer, if the Russian shipment isn’t enough. After that - ? Brazil imports 85 percent of the fertilizer it needs, and now no one is sure just how much fertilizer is in this last shipment from Russia.
To back up this new world order of trade and trade partners, on June 22, 2022, Russia President Vladimir Putin said his country is rerouting (all) trade to “reliable international partners” such as Brazil, India, China and South Africa in a path to avoid western economic sanctions.
“We are actively engaged in reorienting our trade flows and foreign economic contacts towards reliable international partners, primarily the BRICS countries,” Putin related in a video address at the virtual BRICS Summit. BRICS = Brazil, Russia, India, China, and South Africa.
For Brazil, its fertilizer purchase options had, prior to this announcement, meant utilizing third-party Belarus—which had already stated it was happy to sell—or purchase from China. Both countries are aware of the price, and with inventory already pinched globally, the price for fertilizers will go up as the squeeze takes affect. But now with Putin’s announcement, those four countries, excluding seller Russia, will partake in a free-for-all.
Prior to the sanctions against Russia, Belarus was a big seller of potash to Brazil, owning about 20 percent of the potash market. But, in January of 2022, Lithuania decided to pay heed to US sanctions initiated in 2021, and cut off a major transit route to stymie Belarus.
This curtailed amount of fertilizer from Russia will impact the harvests of coffee, sugar, soybeans and more in Brazil. Just 20 percent less of potash fertilizer is expected to drop crop output by 14 percent.
And, since Brazil is key to global food supplies, this impacts more than the South American country.
But, since potash is also an important part of Brazil’s soybean crop… and Canada is the leading producer of potash (Russia being the second largest) … if Canada’s export crop of fertilizer for 2022 hasn’t already been spoken for—see India’s forward-thinking—Canada could be non-shady way of getting enough fertilizer for Brazilian farmer needs.
It depends on whether Brazil wants to take advantage of its BRICS relationship, or maintain its standing with other western nations.
Brazil is responsible for eight percent of global fertilizer consumption and is the world’s fourth-largest fertilizer importer, behind China (24 percent), India (14.6 percent), and the United States (10.3 percent).
As for the US, what will it do?
According to its Department of Agriculture, American farmers exported $177 billion worth of food worldwide in 2021.
That may change in 2022 as American farmers are already feeling the pinch.
With 2022 fertilizer prices already having tripled from last year, those farmers (Canadian and American) who did not lock in their fertilizer costs and purchases earlier are having to come up with solutions.
Regardless of country, agri-retailers are advised to recommend to farmers that they book their 2023 fertilizer needs as soon as possible, and to prepay, take delivery, and store until required.
As for the US, yes, farmers there will still purchase fertilizer, but not as much as they would like to purchase. This means making do with what they have, which could result in a reduced crop. A reduced crop means less food, meaning prices will go up for the consumer. It also means less available food for global markets.
Will the US look after its own populace before sending foods away to other countries? With few exceptions, the US has always maintained a global presence, maintaining its commitments.
But has the US taken any steps to alleviate its fertilizer shortages? It is expected that farmers will plant less corn and use less nitrogen-based fertilizer, which means that for those who do grow corn, prices will be higher owing to a reduced available yield.
In March of 2022, the USDA said it would support additional fertilizer production to address the rising cost of nutrients. It added that it would place US$250 million in a grant program to support new domestic fertilizer production.
In the meantime, looking for alternatives to nitrogen-based fertilizers, US farmers have been purchasing reserves of manure to spread around.
While manure is certainly a renewable resource, manure has become more and more difficult to find, as farmers expecting the fertilizer shortcoming—as predicted in 2021—have purchased large inventories of available supplies.
Along with manure, farmers have always sought fertilizer alternatives. One such alternative, was utilizing processed sewage sludge.
However, a study published in 2021 found that sewage sludge, which many European nations, as well as the US and Canada utilize as a sustainable source of fertilizer in large farms and home gardens, may not actually be a good thing for either the environment or living organisms.
The study found that in all the samples taken, each contained unsafe levels of toxic PFAS (Perfluoroalkyl and Polyfluoroalkyl Substances) known as forever chemicals.
The PFAS are manufactured chemicals that are used to make everyday products—used to stop food from sticking to cookware, or to make clothing and carpets stain resistant. Heck, it even makes an effective firefighting foam.
Unfortunately, during the processing of sewage sludge, PFAS are not affectively broken down, allowing it to be applied to our farmland in the form of microplastics.
In Europe, it is estimated that as much as 42,000 tonnes of microplastics are applied to farmland annually—which if you want to feel even worse, is about the same amount of microplastics found in the surface waters of the oceans.
Other studies have found microplastics contained within human stool samples—imbibed via consumed sea creatures or by our grown crops?
As for US plans to weather the fertilizer shortage—will it follow India’s path where the government purchases fertilizer from Canada or other sources—no one is admitting to anything just yet.
But, if needed, countries need to queue up quickly.
As Fertilizer Canada—an association representing manufacturers, wholesalers and retail distributors of nitrogen, phosphate, and potash fertilizers—recently noted, when it comes to potash production, its members have indicated they are increasing production.
However, it’s not as easy as simply turning up the conveyor belt speed like in an episode of I Love Lucy.
Catherine King, Vice President of Communication with the association said in a recent Canadian parliamentary discussion that, “There are a lot of complexities, (but) they’re going to do all they can to meet the demand that’s out there.”
So there you have it, all you countries of the world. Should you have the need for some fertilizer, Canada is available to take your order. Hopefully, it will have the capacity to get the fertilizer when it is really needed. If not, there is always next year.
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