I have spent my entire life in agriculture – from growing up on my family’s dairy farm in Saskatchewan, Canada, to my current role as head of the largest farm input and service company in the world. I have never seen a gap between global fertilizer supply and demand as severe as the one we have now.
This supply shortage has driven up fertilizer prices, sparking much discussion inside and outside the agriculture industry.
In a recent reportThe Food and Agriculture Organization of the United Nations noted the increase in international fertilizer benchmark prices in 2021 and said, “As with other commodity prices, this fertilizer price dynamic has been determined by the interaction of supply and demand.
Although I cannot speak for the entire fertilizer industry, I would like to explain our perspective on this complex and ever-changing global market. As a fertilizer producer with dozens of mine sites and manufacturing plants in the United States and Canada and a retailer that serves over 100,000 U.S. growers, we have a view of many parts of the supply chain. ‘supply.
The upheaval in the fertilizer market did not happen overnight. It started two years ago, when uncertainty about the effects of the coronavirus pandemic contributed to a slowdown in trade and led to a reduction in fertilizer stocks around the world. Then, in the second half of 2020, demand started to increase sharply.
Several production-related challenges have created supply constraints in 2021, including:
- Natural disasters that slowed or stopped production
- Extraordinary supply chain issues, including labor shortages
- Rapidly rising natural gas prices, which are essential for the production of certain fertilizers
- Global trade limitations, including China’s export restrictions on urea and phosphate fertilizers
When Russia invaded Ukraine earlier this year, the global effects were immediate. Although Nutrien does not have its own operations in Eastern Europe, our hearts go out to everyone affected by the crisis.
The conflict has also aggravated a poor situation with regard to the supply of fertilizers. Russia and Belarus account for 40% of global potash production – and trade and exports from the region have been significantly reduced since early March. In addition, Russia is the world’s largest exporter of nitrogen. The end result is millions of tons less fertilizer available at a time of increasing global demand.
One company cannot make up for the huge supply shortage caused by these factors, but as the world’s largest potash producer and one of the leading producers of phosphate and nitrogen, we are doing all we can .
We announced in March a 1 million tonne increase in potash production which will bring us to a total of 15 million tonnes for 2022. In fact, Nutrien is responsible for over 70% of the global potash production added since 2020.
Additionally, Nutrien’s nitrogen and phosphate fertilizer plants operate at the highest possible rates while meeting our industry-leading safety standards. We increased nitrogen production at our plants in Louisiana, Texas, Ohio, Georgia and Alberta, Canada, adding nearly one million additional tons of capacity from 2018 to 2021. We launched a second phase of projects which should add an additional 500,000 tonnes. tonnes by 2024 to 2025.
We are often asked why Nutrien and other fertilizer producers cannot respond to today’s market by constantly increasing their production. Although Nutrien retains the flexibility to increase potash production as we have done over the past two years, these increases take months to hire staff and purchase equipment. Scaling up fertilizer production on a larger scale takes years and billions of dollars of capital investment.
Growing up in a farming family, and with family members still farming, I understand the pressure on producers when farm input prices rise. We work side-by-side with growers through our retail business unit, Nutrien Ag Solutions, where we advise them on how to use fertilizers as efficiently as possible.
Our 3,900 agronomists and field experts, who have established long-standing relationships with our grower customers, have an array of agronomic solutions to help growers optimize input use, including soil testing, digital, variable rate recommendations and a personalized app. Our grower customers recognize global food supply challenges and use inputs in the most economically and environmentally sustainable way to meet the challenge.
Nutrien will continue to do what it can to provide agricultural inputs and services available to farmers. Just as there is no single cause for rising fertilizer costs, there is no standalone solution to address the disconnect between supply and demand.
Ken Seitz, interim CEO of Nutrien, has more than 25 years of global management experience in the agricultural and mining sectors.
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