Fertiliser crisis: Era of cheap fertiliser "over"

In October, the United Nations warned of a global shortage of food, unless there is immediate action to bring fertiliser prices down.

With nine of the world’s biggest fertiliser companies on course to make more than €57bn in total profits in 2022, pressure is mounting on governments to support alternative technologies, in order to reduce the consumption of chemical fertilisers.

Organisations seeking more sustainable food systems warn that the cost of chemical fertilisers has skyrocketed and is putting severe economic strain on farmers and on public budgets.

However, many governments are responding to the fertiliser price and supply crisis by looking for ways to increase chemical fertiliser production.

Affordable fertiliser was the top priority for Indonesia's President Jokowi last week, when he hosted the G20 summit of world leaders. He warned of the possibility of crop failures exacerbating a global food crisis in up to 48 developing countries with the highest level of food insecurity.

“If we don’t take immediate steps to make fertiliser available at affordable prices, then 2023 will be a bleaker year,” said President Jokowi. There was a similar G20 warning from India's Prime Minister Narendra Modi. In October, the United Nations warned of a global shortage of food, unless there is immediate action to bring fertiliser prices down.

But the increased production of chemical fertilisers will not resolve this crisis, according to a report jointly authored by grain.org and the Institute for Agriculture and Trade Policy, international organisations promoting sustainable agriculture and social justice.

They said the era of cheap fertilisers is over, and the costs have become too much for farmers and public budgets, the environment and health, and food security.

They said, it is becoming difficult for governments to maintain fertiliser subsidies. Ghana, for example, had to scale back its fertiliser subsidy scheme from 450,000 to 150,000 tonnes.

Kenya and the Philippines stepped in with new subsidies but risk racking up large debts and depleting their public budgets. The Indian fertiliser subsidy budget of €26bn is predicted to fall far short of what is needed.

As for G20 nations, they are estimated to have paid an additional cost of at least €21.8bn for key fertiliser imports in 2021, compared to 2020, and are on course to spend three times as much in 2022. For example, the UK paid an extra €144m in 2021 and 2022, and Brazil an extra €3.5bn.

Developing countries with increased import bills include €874m more for Pakistan in 2021 than in 2020, and an extra €384m for Ethiopia in 2021 and 2022.

Meanwhile, according to grain.org and the IATP, fertiliser companies make record profits, which could total €84bn for 2021 and 2022 combined for nine of the largest companies (Nutrien, Yara, Mosaic, ICL Group, CF Industries, Phosagro, OCI, K+S, OCP).

The rising cost of natural gas started to push fertiliser prices up in 2021, further boosted when the war in Ukraine constrained supplies of both gas and fertiliser.

Prices are likely to remain high for years, predict grain.org and the IATP. And with four companies controlling 33% of all nitrogen fertiliser production, they have been able to pass on increased costs, and to maintain or increase their profit margins.

The IATP and grain.org said some credit chemical fertilisers for food production keeping up with populations, but their use has come at a high pollution and soil health cost, and chemical fertilisers account for 2.4% of global emissions.

They said many farmers are already moving away from chemical fertilisers without sacrificing yields. They restore nutrients and fertility to soils with manure or with plants such as legumes that absorb nitrogen from the atmosphere.

Farmers need public support for this transition. But abrupt, top-down bans on chemical fertilisers, such as those in Sri Lanka in 2021, invite failure.

"Addressing farmer concerns is critical to build confidence and avoid strong political opposition, as happened in the Netherlands over recent changes to fertiliser policies," said the IATP and grain.org.