Fertiliser prices have risen nearly 30% since the start of 2022, following an 80% surge in 2021. Soaring fertiliser prices are driven by a variety of factors, including surging input costs of natural gas and coal, supply disruptions caused by sanctions in Belarus and Russia, and export restrictions in China. Urea prices have surpassed their 2008 peaks, while phosphates and potash prices are nearing 2008 levels. Fertilisers are now at their least affordable levels since the 2008 global financial crisis.
Urea prices are expected to remain at historically high levels for as long as natural gas and coal prices remain elevated. Similarly, DAP (Di-ammonium Phosphate) prices are projected to remain high until ammonia and sulphur prices decrease. Prices and supply of urea and DAP depend on when China’s fertiliser export restrictions will be lifted which are expected to last at least until July. Potash prices are anticipated to remain historically high with constrained supply for the remainder of 2021 unless supply from Russia and Belarus returns to international markets.
Figure 1: Fertiliser Prices from 2008-2022
Source: Bloomberg; World Bank
From a production perspective, there are serious concerns on a global scale surrounding the availability and affordability of fertilisers for the 2022 season. Supply disruptions and export restrictions are having serious impacts on a number of vulnerable countries. Mongolia, affected by both Russian and Chinese policies, has seen 98% of its fertiliser supply restricted, Nicaragua 80%, Ecuador 74%, Côte d’Ivoire 63%, Cameroon 60%, and Azerbaijan 43%, among others. Producers are investigating supplements to synthetic fertilisers and methods to reduce synthetic fertiliser use in an effort to reduce additional costs.
The first method consists of improving nutrient use efficiency through technology and intelligence. Analysing and understanding the soil composition and pH levels and correcting for any deficiencies can improve nutrient uptake but also improve root development which increases the ability of the plant to maximise nutrient uptake. Monitoring and information systems such as crop imagery and biomass measurements from drones and satellites, along with nutrient sensors and tissue testing, are useful tools for monitoring crops and better understanding their nutrient requirements. Producers can use this information to adjust the rate of fertiliser application, the timing of application, and application intervals to the needs of the crop. Lastly, producers can use precision fertiliser application technology and spreaders to apply fertiliser more precisely. In essence, producers should focus on applying the right amount, at the right time of year, with the right method and with the right placement in an effort to optimise and reduce fertiliser use.
The second method involves soil microbiome improvement to increase the ability of crops to absorb the available nutrients. Healthy microbial activity in the soil is critical to decomposing organic material and aids in recycling and regulating soil nutrients such as carbon, nitrogen and phosphorus. Healthy soils increase the availability of nutrients which could reduce the use of fertiliser, especially over time. Recent improvements in understanding the soil microbiome have led companies to develop products to activate and enhance soil microbiome activity. Producers can further increase soil microbiome activity by ensuring year round cover crops, employing no or less tillage practices, allowing plant matter to decompose in fields, and supplying additional organic matter such as mulch, and manure to the soil.
The last method is to supplement synthetic fertilisers with organic fertilisers. Mulch, manure, organic waste (e.g. grape stems and skins), and cover crop waste are examples of organic matter components that producers might already have access to that can be converted into organic fertilisers. Wine and fruit farmers in South Africa for example create an organic compost from one third of each chicken manure, grape stems and skins, and mulch to supplement and reduce their fertiliser use. Organic fertilisers such as biochar, bone meal, guano, kelp, and alfalfa pellets are ready made for purchase and use, providing further supplements to synthetic fertilisers. Apart from the nutrient value of organic fertilisers, they also promote microbial activity in the soil.
The advent of synthetic fertilisers revolutionised modern agriculture and will remain a crucial component in the future of commercial agriculture. However, producers can optimise the use of synthetic fertilisers by maximising nutrient use efficiency through precision application, enhancing the microbial activity in the soil, and incorporating organic fertilisers and organic material into their management practices.