The energy crisis choking Europe’s fertilizer production threatens to force the world’s farmers to use even less of the nutrients crucial to growing food.
The CRU Group estimates that rising prices for gas, a key feedstock, have already constrained a quarter of Europe’s nitrogen fertilizer capacity. Now there are growing concerns that the crisis is getting worse. For Europe, this could mean even lower production and greater dependence on imports of ammonia, which is used to make nitrogen products.
This will also have an impact elsewhere. With higher prices and tighter supplies, farmers could cut global fertilizer use by up to 7% next season, the highest since 2008, the International Fertilizer Association (IFA) warns. The risk of slashing crops as the world grapples with a cost-of-living crisis and worsening hunger.
“If European farmers import more produce from other exporters, then this will make the global market tight for the more vulnerable agricultural markets in sub-Saharan Africa, South Asia and parts of Latin America,” said Laura Cross, Director of Market Intelligence at IFA.
The biggest drop in fertilizer use next season will be in sub-Saharan Africa, with a drop of up to 23%, the IFA said.
After softening in previous months, fertilizer prices have started to rise again as gas rallied on lower supplies from Russia and European heatwaves that have fueled demand.
European fertilizer producers have been hit hardest by high gas prices. The global sector is also grappling with US and European Union sanctions on potash sales from Belarus and China’s attempt to curb supplies. In addition, trade in Russian nutrients has suffered from self-sanctions by many shippers, banks and insurers and difficulties in servicing Russian exports.
According to the CRU, it is currently much cheaper to import ammonia to Europe than to produce it there.
“I don’t see how anyone can continue to produce in Europe, apart from those who have hedged gas costs,” said Chris Lawson, CRU’s fertilizer division manager. “We assume that ammonia prices will continue to rise.”
Europe — which produces about 20 million tons of ammonia annually — needs to import another 200,000 tons a month to ease the crisis, Lawson said. Shipments from the Black Sea region could bring some relief in the coming months, he said.
Soaring gas prices since June mean “cutbacks and shutdowns are happening again,” said Lukas Pasterski, a spokesman for industry association Fertilizers Europe. “Basically this would lead to higher imports, but a lot depends on the availability and price of fertilizers on the world market.”
For now, the nitrogen market will remain very tight, Bert Frost, senior vice president of sales at major producer CF Industries Holdings Inc., said last week. Limited supply may mean some food shortages later this year and into 2023, he said.
The crisis shut down or halted production in Europe alone in July 10 of fertilizer factories, and things could get worse from here.
CRU said the amount of the region’s nitrogen capacity that has been restricted – currently at least 25% – is likely to increase. The fertilizer manufacturers Yara International, K+S AG, Borealis AG and Fertiglobe Plc have recently warned of further production cutbacks across Europe.
Concern is growing that there will not be enough fertilizer for next year. Sean Finan, who runs a cattle station in County Roscommon, Ireland, and needs nutrients for his pastures, is one who is considering securing supplies sooner than usual.
“Everything indicates that prices will be high,” said Finan, who may be claiming a subsidy stimulus from his co-op. “Availability would also be an important factor. I don’t want to end up on a waiting list in February if I have to apply.”
https://www.independent.ie/business/farming/news/farming-news/fertiliser-usage-is-being-pummeled-by-europes-energy-crisis-41919986.html The use of fertilizers is being affected by the energy crisis in Europe