Summary of the USDA Trade Report: Impacts and Repercussions of Price Increases on the Global Fertilizer Market

In June of 2022 the United States Department of Agriculture released a report titled "Impacts and Repercussions of Price Increases on the Global Fertilizer Market". This report reviewed the global fertilizer landscape, with a focus on the three main macro-fertilizer groups-nitrogen, phosphorus, and potassium (NPK). The USDA examined 5 the major fertilizer suppliers and users, the major exporters and importers, the impact of the Russian invasion of Ukraine; and discusses how the United States fares relative to other countries. Below is a synopsis of the information presented in the USDA report. The link to the original report can be found at the bottom of the article.

Global fertilizer prices are approaching record levels and may remain elevated throughout and beyond 2022 (Chart 1). Fertilizer prices account for nearly one-fifth of U.S. farm cash costs, with an even greater share for corn (36%) and wheat producers (35%).

The current rise in fertilizer prices began in 2021 with surging natural gas prices, especially in Europe, resulting in a reduction of ammonia-based nitrogen fertilizer production. Furthermore, coal price increases in China led to a rationing of electricity causing some fertilizer plants to decrease production. This resulted in China imposing a quota on fertilizer exports, particularly phosphates, until June 2022, citing the need to ensure domestic availability and food security. China's suspension of fertilizer exports significantly diminished the global supply. The Covid-19 pandemic caused world-wide strain on the supply chain and the Russian invasion of Ukraine in 2022 further exacerbated supply chain issues.

Fertilizer Supply Outlook

• Combined, China, Russia, the United States, India, and Canada produce more than 60 percent of the world's fertilizer nutrients (Chart 2).

• Russia and the United States each produce less than 10 percent of global fertilizers, while China produces approximately 25 percent.

• The degree of concentration in production increases with individual components of the NPK complex. Ten countries produce 71, 86, and 95 percent of N, P, and K fertilizer, respectively.

• Phosphorus and potassium are mined minerals; such reserves are not available in many countries. China produces more than one-third of the world's phosphorus, followed by the United States, India, Morocco, and Russia, respectively. Combined, these five countries produce more than three-quarters of the global supply of phosphorus.

• Potassium production is the most concentrated. Two-thirds of all potassium reserves are supplied by only three countries: Canada, Russia, and Belarus.

• The United States is a significant producer of nitrogen and phosphorus yet imports large quantities of potassium-based fertilizers.

• Canada produces approximately one-third of the global potassium supply, while Russia and Belarus combined produce the other third.

• Almost every country relies on obtaining their fertilizers from the few countries with available fertilizers.

Where and How are Fertilizers Used?

While fertilizer production is highly concentrated, fertilizer use is widely distributed globally (Chart 3).

• Based on the 3-year average data (2017-2019) from the International Fertilizer Association (IFA), China is the largest user of fertilizer, using nearly one-quarter of global fertilizer supplies.
• India is the second largest user. Much of India's usage is fueled by the Indian Government's heavy subsidization of fertilizers.

The United States accounts for approximately 10 percent of global fertilizer usage with most of it being used in grains and oilseed production.

Major Fertilizer Exporters and Importers

The main fertilizer exporters fall along the line of the highly concentrated producers (Chart 4). The fertilizer sector is vulnerable to disruptions because there are few exporters.

• Five countries/regions export more than 60 percent of all fertilizers-Russia, Canada, the European Union, China, and Belarus.

• Five countries/regions export approximately 60 percent of nitrogen fertilizers-the European Union, China, Russia, Qatar, and Saudi Arabia.

• Five countries/regions export more than 75 percent of phosphorus fertilizers-China, Russia, the European Union, Morocco, and the United States.

• Five countries/regions export more than 90 percent of potassium fertilizers-Canada, Russia, Belarus, Morocco, and the United States.

• Russia and Belarus command nearly 25 percent of the global export market share of all fertilizers. Combined, they supply more than one-third of global potassium exports.

• Canada is the largest exporter of potassium fertilizers, accounting for approximately 35 percent of all exports.

Fertilizer imports are typically dictated by a country's crop production area and the type of crops being produced. Furthermore, countries which require blended NPK fertilizers but don't have the capacity to meet their own needs are heavily reliant on fertilizer impots. Brazil, Canada, and Mexico are heavily dependant on imports, importing more than 60 percent of their fertilizer.

The United States imports nearly 20 percent of all its fertilizer, despite producing a significant amount of nitrogen and phosphate fertilizers. Much of its imports are potassium-based fertilizers, but it also imports nitrogen and phosphorus. Some of these imports are likely being used by manufacturing and blending facilities to make compound fertilizers, some of which are re-exported (Chart 5).

Russia and Belarus play critical roles in the global fertilizer market, accounting for nearly 20 percent of global exports. Mexico and Brazil receive more than 25 percent of their imports from Russia and Belarus-a considerable dependency. The United States purchases 14 percent of its imported fertilizer from Russia and 3 percent from Belarus.

Because Russia and Belarus are two of the limited suppliers of potassium-based fertilizers, economic sanctions on Russia and direct sanctions on Belarusian potash are negatively impacting the global potash supply. Ukraine, while not a major fertilizer exporter is a major grain and oilseed producer, one that imports 65% of its fertilizer from Russia and Belarus. The direct impact of the conflict between these countries is a shortage of both fertilizer and food on the world market, let alone how other countries and producers respond.

In response to high input costs, some producers may have chosen to reduce the overall acreage planted, or they may plant more acres to leguminous crops such as soybean or pea to utilize the N-fixing capabilities of those crops. A significant increase in soybean acres conversely would reduce the acres normally seeded to grain or corn, further adding to global food shortages. Others chose to maintain acreage but change crop mix or modify other practices. Given the current relatively high prices of commodities-corn, wheat, and soybeans-reasonable profit margins are possible, despite the high input (fertilizer) prices.

The global outlook for 2023 may be even more dire. As the Russia-Ukraine war continues and the supply of fertilizer remains limited, high prices are likely to have a more profound impact on 2023 planting decisions. Producers in the United States may be able to increase production, despite commodity prices remaining high, but will have to grapple with the expectedly high input prices for commodities.

Fertoz rock phosphate is mined Montana and as such, we are not heavily reliant on overseas fertilizer suppliers. This allows Fertoz to provide growers in the United States with locally sourced, high quality rock phosphate fertilizer. 100% of our sales are within North America. Fertoz fertilizer is locally sourced, delivered locally.

Link to original article: Impacts and Repercussions of Price Increases on the Global Fertilizer Market | USDA Foreign Agricultural Service

Citation: Nti, F.K. 2022. Impacts and Repercussions of Price Increases on the Global Fertilizer Market. USDA, International Agricultural Trade Report.

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