A Perfect Storm in Fertilizer Markets

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Agriculture producers worldwide are facing higher fertilizer prices. The World Bank reported a 66% increase in fertilizer prices in 2021 and anticipates potassium fertilizer prices to sharply increase in 2022. What explains these steep increases in most fertilizer prices? 

Key Takeaways

• With few, very large players influencing world fertilizer markets, production decreases in Europe, China and Russia have dropped world fertilizer supply and induced sharp price increases. 
• High prices of natural gas and ammonia in Europe and Russia, and in China, high prices for coal, have created electricity shortfalls and disruptions in their high energy intensive fertilizer industries.
• Trade policies have also impacted fertilizer prices, effectively reducing imports from key sources. U.S. tariffs are in place on fertilizer products from China, Russia and Morocco as a response to several anti-dumping and countervailing duties (AD-CVDs) initiated by the Department of Commerce (DoC) and the U.S. International Trade Commission, and China and Russia have implemented export restrictions to keep domestic fertilizer costs down in the face of supply challenges.
• The World Bank in its October 2021 outlook does not expect nitrogen and phosphate fertilizer prices to keep climbing. Potassium prices are expected to climb dramatically. Eventually, supply disruptions and transportation issues will subside and new trade patterns will be established, but these will take time and additional resources. Energy policies aiming to curb fossil fuels will keep energy prices — and, hence, fertilizer prices — high unless a reality check will induce a policy correction.

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