Fertiliser prices have risen nearly 30% since the start of 2022, following last year’s 80% surge. Soaring prices are driven by a confluence of factors, including surging input costs, supply disruptions caused by sanctions against Belarus and Russia as well as and export restrictions by China.
Urea prices have surpassed their 2008 peaks, while phosphates and potash prices are inching closer to 2008 levels.
Concerns around fertilizer affordability and availability have been amplified by the war in Ukraine.
Record-high input costs
Rising natural gas prices, especially in Europe, led to widespread production cutbacks in ammonia—an important input for nitrogen-based fertilisers.
Similarly, soaring prices of coal in China, the main feedstock for ammonia production there, forced fertiliser factories to cut production, which contributed to the increase in urea prices. Higher prices of ammonia and sulphur have also driven up phosphate fertilizer prices.
Sanctions and export restrictions
Fertiliser prices rose in response to the war in Ukraine, reflecting the impact of economic sanctions and disruptions in Black Sea trading routes.
Russia accounts for about 16% of global urea exports and 12% of DAP and MAP exports, while Russia and Belarus together make up two-fifths of global MOP exports.
Adding to supply concerns, China has suspended exports of fertilizers until at least June 2022 to ensure domestic availability.
Supply disruptions
Although urea and DAP prices have retracted in recent weeks due to lower tender offers in India as buyers await clarity on Indian fertiliser subsidies, potash prices show no signs of easing.
Potash supply shortages and uncertainty have increased following fresh sanctions on Belarus and Russia.
Moreover, Lithuania has halted the use of its railways’ network to transport Belarusian potash to the port of Klaipeda, which typically handles 90% of Belarusian fertilizer exports.
Robust demand
Global fertiliser consumption has remained strong throughout the COVID-19 pandemic. Brazil and the United States have allocated record acreage to soybean (a fertiliser-intensive crop).
Demand is also strong in China due to increased feed use, especially maize and soybean meal, as the country is rebuilding its hog herd population following the African swine fever outbreak.
Fertilisers are now at their least affordable levels since the 2008 global food crisis, despite higher crop prices, which may limit fertilizer use.
Outlook and risks
Urea prices are expected to remain at historically high levels for as long as natural gas and coal prices remain elevated.
Similarly, DAP prices are projected to remain high until ammonia and sulphur prices ease. Apart from input costs, risks to the outlook depend on whether China’s urea and DAP exports will resume after June.
For potash, prices are anticipated to remain historically high through the next year unless supply returns to international markets from Russia and Belarus.
