Fertiliser and food prices could be high for years
Added on 20 April 2022
Russia and Belarus supply more than 20% of the world's fertilisers, in a market that was extremely tight even before the Ukraine conflict last month. Fertiliser is crucial to agricultural output and global demand for it rose by 6.3% in 2021. This, combined with supply disruptions, took prices 78.6% higher year-on-year in 2021, according to the IMF. After the conflict, fertiliser prices soared to record highs. Tighter Western sanctions on Belarusian fertiliser producers last month have heightened the supply-side risks.
What next
The fertiliser market imbalance, like that in the semiconductor chip market, will last well beyond this year. Persistently higher fertiliser prices will reduce usage and thus lower crop yields into 2023. This will increase poverty and food insecurity, and dampen GDP growth and living standards. Supply will fall faster than demand for fertiliser in 2022/23, keeping prices high and prompting self-sufficiency drives and supply chain changes. This may increase intra-regional trade in fertiliser.
Subsidiary Impacts
ˇ About 30% of the world's population lacked access to adequate food in 2020, the World Bank says, and the share could exceed that in 2022.
ˇ Carbon dioxide produced as a by-product of fertiliser output is key to packaging fresh food; more CO2 shortages will disrupt food packing.
ˇ Fertiliser output, consumption and trade patterns will change as countries seek more self-sufficiency, creating chances for new suppliers.
ˇ Merger and acquisition activity will rise in the fertiliser market, likely raising market concentration and contributing to higher prices.
ˇ Lower use of fertilisers will reduce emissions from their production and application, helping countries to meet climate targets.
Source: Ag News
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