Farmers and economists are warning Americans of a coming crisis much worse than the country’s current inflationary woes as a result of a severe fertilizer shortage combined with skyrocketing water and fuel costs.
Fertilizer prices were already increasing steadily in the U.S. before the European energy crisis took the market to new levels. Farmers around the world are beginning to directly experience the impact of market conditions for fertilizer that is hard to find even at recently elevated prices.
Rabobank director of research Samuel Taylor told Market Watch that the market for micronutrient fertilizers is now “almost like a perfect storm.” He noted that most consumers are not aware that natural gas is a key ingredient in the process of producing nitrogen-based fertilizers. Those fertilizers are critical for most American crops, including corn and wheat. The cost of natural gas makes up 75% to 90% of the processing costs in nitrogen production.
There has been some speculation that spiking nitrogen costs could push many farmers to substitute soybeans for corn in their planting plans. Soybeans are able to naturally synthesize natural nitrogen sources provided by bacteria and are much less reliant on additional nitrogen delivered through fertilizers. Soybeans still require about the same amount of phosphorus and potassium fertilizers as corn, so experts do not believe a short-term fix of crop substitution will be successful.
American fertilizer producer Mosaic Company reported earnings for last year of $3.6 billion, up 129% from the year before. The company’s CEO predicts record earnings to continue in 2022 as imported fertilizers are likely to become even more difficult to supply.
The sanctions on Russia coming after its invasion of Ukraine are now expected to put fertilizer supplies at seriously depleted levels. Since the sanctions have gone into effect, prices are surging so quickly that many U.S. farmers are unable to buy soil nutrients as the planting season approaches.
Russian fertilizer and coal billionaire Andrei Melnichenko, who is half Ukrainian, said that the world urgently needs peace in Ukraine. He added that one of the collateral victims of the crisis brought on by the Russian invasion will be international agriculture and food supplies.