According to the USDA, three kinds of fertilizer inputs have dramatically increased in price over the past year. The cost of urea is 149% higher YoY, liquid nitrogen is 192% more expensive, and anhydrous ammonia is up 235%. In 2019, Russia was the world’s top exporter of fertilizers, and its trade value accounted for USD 9B. However, Russian officials have had fertilizer producers slow their exports in retaliation for Western sanctions, causing prices to soar.
Fertilizer prices have soared in all importing countries at different levels. According to the Green Markets North America Fertilizer Price Index, in W3 of March-22, fertilizers in the US reached a new high by increasing 16% YoY and 40% MoM from W3 in Feb-22. In addition, prices for widely used nutrient urea soared 22% YoY, reaching a record high. In Brazil, the price for potash, another widely used fertilizer, has registered another record high by increasing 34% YoY.
In Mexico, from the 5.4M mt of consumed fertilizers in 2021, 62% were imported agrochemicals, indicating a high-level dependence on the foreign market. Russia was the primary supplier to the Mexican market from all of the imports, with a 27% share of all fertilizer imports, most of which were urea nutrients. Thus, fertilizers prices in Mexico have skyrocketed to a record high across Mexico.
Some of the prices reported by the end of March-22 in key fruits and vegetables productive areas have reached USD 1,150/ton for the urea chemical, while in the same month last year, the price stood at USD 400/ton, a 187% YoY increase. Monoammonium phosphate, another fertilizer widely used in crops, follows a similar increase trend, as the price at the end of Q1-22 was around USD 1,200/ton, an increase of 118% YoY.
Although Mexico’s inflation is linked to a general increase in fresh produce prices, the rise in the price of agrochemicals directly affects all crops' production costs, as fertilizers are the most basic input of all Mexican agricultural production. According to data from the National Institute of Statistics and Geography (INEGI), the wholesale prices of fruits and vegetables this year have accumulated an annual rate price of 19.6%.
The products that have had a considerable impact on prices this year are avocados, lime, onion, bell peppers, and cabbages, all of them holding an important export market, particularly in the US. Lemon prices in Mexico have skyrocketed this year, reaching 181.48% YoY increases due to abnormal weather and high production cost led by fertilizers. The wholesale price of Mexican fresh bell pepper also escalated by 168.5% YoY at the end of Q1-22.
Also, the price of cabbage in Mexico has soared by 57.25% YoY in W3 Mar-22 due to high demand from the US and high input costs, such as fertilizers. Furthermore, the price of Mexican onion has also skyrocketed in the wholesale market to 139.28% YoY, with fertilizers as one of the main variables.
Undoubtedly, Mexico needs to urgently diversify its fertilizer supply from other major producing countries such as the US and China. However, with less availability in the US and lower capacity for moving containers from China, the second-largest exporter in the world, prices will remain high for at least the rest of the year.
For small and medium-sized Mexican producers, the rising price of fertilizers will directly translate into reducing the dose of fertilizers from 30 to 50% in their fields due to the uncertainty of the prices at which they will sell their crops. Therefore, there is a risk that farmers will stop planting many crops, creating a shortage of supply and subsequently supporting even higher price increases.