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What You Need to Know About Fertilizer Prices in 2023

Jun. 10, 2024

What You Need to Know About Fertilizer Prices in

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What You Need to Know About Fertilizer Prices in

Like many other things, where we saw a dramatic increase in price over the past few years, fertilizer prices skyrocketed in . While they have come down in early , they continue to be higher than normal.

Increases have affected all types of fertilizers &#; regular fertilizers, water-soluble fertilizers for flowers, vegetables and cannabis, micronutrient fertilizers and many others. It has particularly affected potash, phosphate and potassium nitrogen fertilizers. The question everyone wants an answer to is, will fertilizer prices go back down to normal in ? While we&#;re already seeing some softening in prices early in , if you&#;re expecting prices to return to pre-pandemic prices, the news doesn&#;t look as promising. 

&#;With natural gas prices still high and major market disruptions due to the Russia-Ukraine war, we don&#;t expect fertilizer prices to normalize in time for farmers&#; crop planning,&#; said FBN Chief Economist Kevin McNew on Agrinews.

Why were fertilizer prices so high in ?

Fertilizer prices are market-driven. They are typically determined by supply and demand. There are a lot of things that happened globally that affected supply and demand. There was and continues to be a war between Russia and Ukraine. The other major event was China restricting exports. This has led to supply chain costs being historically high. And we mean significantly higher than pre-covid times.

Prior to the pandemic, the cost of a container of fertilizer from China was $3,000. By May of , it was closer to $30,000 per container. Now it&#;s back down to normal. But in Europe, the cost of a container was $2,500-3,000, then went as high as $20,000 during the pandemic, and now it is approximately $7,000 so it is not back down to normal. This has a big impact on costs because fertilizer is a heavy commodity. You can only ship 24,000kg per container, so the cost per kilo was driven almost as high as the cost of the raw material itself &#; and, in some cases, even higher!

Finally, because of the spike in price, businesses started to stockpile supplies. Then the demand became unprecedented because clients were stocking up and usage was high. It&#;s a similar effect that happened to other products during the pandemic &#; toilet paper, formula, children&#;s Tylenol, and many others.

Will fertilizer prices go down in ?

So, will prices normalize in ? There will be a softening in the market &#; we are seeing it already &#; but they not return to pre-pandemic levels.

The Ag market affects the horticultural market. Manufacturers look at the net back on each. So, if Ag goes up, horticultural goes up within 2-6 months. The same is true if it goes down.

Currently, the commodity markets are down about 30% from their peak, however, they are still not at pre-Covid levels. 

Also, food pricing is very high at the moment. So, farmers will not pull back on inputs as their profit supports fertilizer inputs.

The good news is we don&#;t anticipate any type of fertilizer shortage this year unless there is another significant global event.

Summary: key issues affecting fertilizer prices in and in the future

U.S. and Canadian fertilizers come from all over the world. There will continue to be a variety of factors that will affect its pricing in the short and long term future. So, it&#;s still uncertain when prices will go down and how long they will stay at their current levels is unclear. Here are the key things to keep an eye on this year:

  • China

    : The country continues its restrictive fertilizer exports policy in

  • Russia

    : They have increased export tax and export quotas.

  • Natural gas prices

    : EU natural gas prices continue high

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  • Freight costs

    : They are going down but are relatively high historically (sea and land) from Europe

  • Supply chain

    : Congestion in transportation ports is easing

  • War:

    Continued uncertainty from the Russian/Ukraine conflict

  • Commodity market

    : Strong Ag fundamentals 

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Fertilizer prices ease but affordability and availability ...

Photo: ©VisualArtStudio/Shutterstock

This blog is the seventh in a series of 11 blogs on commodity market developments, elaborating on themes discussed in the October edition of the World Bank&#;s Commodity Markets Outlook.

Fertilizer prices have eased from their early peaks but they remain at historically elevated levels. The price easing partly reflects weak demand as farmers cut back fertilizer field applications due to affordability and availability issues. The industry is also affected by supply-side issues, including a production crunch in Europe, disruptions due to sanctions on Russia and Belarus, and trade restrictions in China.



Production crunch in Europe. The sharp increase in natural gas prices in Europe has led to widespread production cutbacks in ammonia&#;an important input for nitrogen fertilizers. As of October , about 70% of European ammonia production capacity had been reduced or shut down.  However, input costs have declined in recent months due to increase imports of liquefied natural for national reserves in Europe as well as expectations of a milder winter. This could allow some shuttered nitrogen fertilizer production facilities in Europe to resume operations.


 

Supply disruptions from the Ukraine-Russia war. Following Russia&#;s invasion of Ukraine in February , several economies (including the EU and the U.S.) imposed sanctions on Russia and Belarus, both important fertilizer suppliers.  However, the trade sanctions have specified &#;carve-outs&#; for the food and fertilizer sectors to avoid adverse effects on global food security. These carve-outs have enabled Russia to continue exporting fertilizers. However, potash exports from Belarus have fallen by more than 50% due to the restriction on using EU territory for transit purposes. In particular, Lithuania has halted the use of its railway network to transport Belarusian potash to the port of Klaipeda, which typically handles 90% of Belarus exports.



Export restrictions in China. Supply concerns have been exacerbated by China's extension of export restrictions on fertilizers until the end of in order to maintain domestic availability. DAP exports from China, which accounts for 30% of global trade in DAP, fell by nearly 50% (y/y) during the first ten months of . Meanwhile, Chinese urea exports declined by about 60% (y/y) over the same period.

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