The Wall Street Journal has a new video that clearly lays out the reasons for today's record-high fertilizer prices, how that affects agriculture and food prices worldwide, and why those high prices could persist into next year.
An array of global supply-chain shortages have made it more difficult and expensive to manufacture fertilizer. In 2021, China halted exports of phosphate, a key ingredient in fertilizer. And in December last year, the U.S. and the European Union imposed trade sanctions on Belarus for alleged human-rights violations. That halted the export of potash, another critical fertilizer ingredient, from the world's third-largest potash producer. Those and other trade restrictions involving Russia, Turkey, and Egypt slowed global fertilizer exports last year. The U.S. imports nearly all of its potash—83% from Canada—but residents near at least one potential mining site in the U.S. have rebuffed attempts to increase domestic supply, Grist reports.
Recent trade sanctions on Russia have worsened the strain, since Russia is the world's largest fertilizer exporter and one of the top five potash producers. Even countries without sanctions against Russia must pay sky-high prices to insure the vessels carrying the potash or fertilizer, since the war makes transport much riskier for those ships. Meanwhile, "rising natural gas prices have prompted some European factories to scale back fertilizer production," WSJ reports. "Natural gas is another major Russian export and a key ingredient in making nitrogen-based fertilizer."
For American farmers, that means fertilizer is nearly three times more expensive as it was in early 2021, said Joel Brinkmeyer, CEO of the Agribusiness Association of Iowa. Farmers operate on extremely tight profit margins, and fertilizer is already one of their biggest expenses each year. Higher production costs means farmers must pass the cost on to buyers such as grocery chains and animal feed companies. The increased feed costs make meat more expensive too.
Some farmers have delayed their planting for this year in hopes that fertilizer prices will drop; later harvests could create even more supply-chain snags. Some farmers decided to cut back on fertilizer use, which could result in lower crop yields. And some farmers have decided to plant crops that need less fertilizer, such as soybeans instead of corn.
The worst-case scenario, Brinkmeyer said, is that the fertilizer shortage causes widespread shortages of crops and animal feed: "If we don't produce the crops, we can't probably produce the livestock and the poultry, and we get into actual food challenges in the U.S., and that would be a much, much greater concern than what we have today."
Some farmers are considering alternatives to commercial fertilizer such as biologicals, which are natural fertilizers containing microorganisms that enhance soil fertility. But that's a big risk farmers typically can't afford to take.
from The Rural Blog https://ift.tt/H0Jxqzn Wall Street Journal explainer video shows why fertilizer prices are so high and how that could play out int 2023 - Entrepreneur Generations
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