Fertilizer producer Yara International last week announced further production cuts in the face of rising natural gas prices. Yara said the cuts will bring its European capacity utilization for ammonia, the main ingredient in all nitrogen fertilizers, to just 35%.
The move, which followed cutbacks by fertilizer companies in the UK, Lithuania, Hungary, and Poland, renews fears for global agricultural production at a time when the world’s supplies of many commodities remain tight and the Russia-Ukraine war is severely limiting grain exports from the Black Sea region. The latest fertilizer production cuts could impact supplies and prices when Southern Hemisphere countries begin planting in the next few months.
Europe-wide, fertilizer production capacity utilization, excluding Ukraine, is running at an estimated 50% for ammonia and at about 33% for nitrogen fertilizer, according to CRU Group, an independent fertilizer consultancy. Europe’s fertilizer industries are especially hard hit as Russia reduces supplies to the region of natural gas, a critical feedstock in fertilizer production.
A Gro analysis, using Gro’s Global Fertilizer Impact Monitor, finds that reduced farm fertilizer usage because of tight supplies and high prices would have profound effects on food production in some parts of the world, decreasing harvests and increasing the urgency of emergency food aid relief.
Most of the fertilizer that European countries produce is used domestically or exported to other countries in the EU bloc. Sizable exports also go to South America, Mexico, Southeast Asia, and Africa. In March, for instance, Ghana and Brazil were among the biggest buyers of fertilizer from Belgium, the EU’s third-largest exporter. View a display in the Gro Portal of European fertilizer production and exports.
For farmers, that could mean hard-to-get fertilizer supplies, and higher input costs.
Gro’s Global Fertilizer Impact Monitor quantifies the impact of reduced nitrogen fertilizer usage on production of four staple crops — corn, rice, soybeans, and wheat — in countries around the world. The Monitor, which was built with support from the Bill & Melinda Gates Foundation, and in partnership with the International Fertilizer Association (IFA) and CRU Group (CRU), models a total of seven different fertilizer application scenarios, based on application rate forecasts and scientific inputs from IFA and CRU.
The Monitor, which is free for anyone to use, shows that worldwide production of the four staple crops combined would decrease between 0.42% and 2.11% compared with 2021 levels, depending on the fertilizer usage scenario.
The outcomes for individual countries vary widely.
Gro’s analysis shows that the impact of the fertilizer crisis globally is less severe than estimates by other sources had feared. Still, because of the uneven impact of the crisis, continued cuts to fertilizer production in Europe and elsewhere, especially combined with drought conditions in many parts of the world, could disproportionately affect certain countries and possibly lead to increased levels of food insecurity.