Tuesday, May 24, 2022

Can the Russia / Ukraine conflict increase high fertilizer prices?

The Russia / Ukraine conflict is an ongoing story and it is too early to clearly predict the consequences of the war to the fertilizers market. While we don’t have a clear vision on this, here are some key points to think about:

– The fertilizers our farmers in North Carolina use contain three main nutrients for plants: nitrogen, phosphorus and potassium.

– The United States produces part of the fertilizers our farmers use but we also import raw ingredients and fertilizers from other countries. The United States produces about 85% of its nitrogen and 90% of phosphate but imports 90% of its potash.

– The price of fertilizers is dictated by the international market. It means if there is a shortage anywhere in the world, the prices will also go up here in the U.S.

– Producing nitrogen fertilizers requires a great deal of natural gas. The price of natural gas in Asia (Russia and China) and Europe surged after October 2021 due to the cold winter and higher usage for heating. As more natural gas was used for heating, it reduced the availability of natural gas for the fertilizer industry. As consequence, the price of nitrogen in the international market doubled from October 2020 to December 2021.

– China is responsible for 30% of the global nitrogen trade. Due to the shortage of natural gas, China suspended its sales of nitrogen fertilizers to the international market in October 2021 until July 2022. As China sells fertilizers containing both nitrogen and phosphorus, the energy crisis also affected the prices of phosphorus fertilizers.

– Russia has large reserves of natural gas and provides about 40% of the natural gas used in Western Europe. The natural gas pipelines from Russia to Western Europe passes through Ukraine. Our concern is that the war in Ukraine may impact the natural gas supply to Europe. If Europe has less availability of natural gas, they may reduce their nitrogen fertilizer manufacturing and import more fertilizers. Higher nitrogen demand will certainly impact the nitrogen fertilizer prices in the U.S.

– Russia is a large exporter of ammonium nitrate, a nitrogen fertilizer. With the conflict and because of the commercial sanctions imposed on Russia, nitrogen prices will most probably be impacted.

– Belarus is responsible for 20% and Russia is responsible for 19% of the global sales of Muriate of Potash, the most important type of potassium fertilizer. Since 2021 Belarus is under sanctions from European Union and the U.S. After the Ukraine invasion, Russia is also under sanctions. Because of the sanctions and the proximity of the conflict zone, it probably will affect the capacity of Belarus and Russia to sell their Muriate of Potash in the global market. This will impact fertilizer prices in the U.S.

– We still are trying to evaluate the consequences of this unfolding conflict on agricultural supplies, but we believe fertilizer prices will remain high and possibly even increase in price in the near future.

– Fertilizer prices will be a challenge for this year’s cropping season. As the farmers are planting their summer crops in April/May, they will need to deal with abnormally high prices for fertilizers.

– Our recommendation is for North Carolina farmers is to get their soils analyzed in a soil testing laboratory (NCDA Agronomic Services, for example). Fertilizer recommendations from soil tests can help farmers determine if they can reduce their fertilizer use without affecting crop yield. For instance, many North Carolina soils are high in phosphorus and may not need any phosphorus.

Nitrogen fertilizer recommendations come from a web-based tool (https://realisticyields.ces.ncsu.edu/) that will help match crop nitrogen needs to fertilizer rates. Close attention to nutrient recommendations may help reduce fertilizer costs.

-We expect this situation can be solved and the fertilizer prices will go back to normal levels, we just do not know when. Let’s hope for the best but prepare to the worst.

 

 

Dr. Luke Gatiboni is a soil fertility specialist and assistant professor for Crop & Soil Sciences at NC State University. He may be reached at luke_gatiboni@ncsu.edu.
Dr. Deanna Osmond is a department Extension leader and professor for Crop & Soil Sciences at NC State University. She may be reached at deanna_osmond@ncsu.edu.

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