High fertiliser prices threaten food production amid drought worries
Chinese workers seal sacks of Kunlun urea at a chemical fertiliser plant of China National Petroleum Corporation in Tarim, northwest China. PHOTO | AFP
Higher natural gas prices in Europe also resulted in widespread production cutbacks in ammonia — an important input for nitrogen fertilisers — while escalating thermal coal prices in China led to a rationing of electricity use in some provinces forcing fertiliser factories to cut production.
Fertiliser prices increased sharply in the third quarter of 2021 and continued rising in early November, reaching levels unseen since the 2008-2009 global financial crisis, the World Bank said.
Food insecurity in the region —where several conflicts in the Horn of Africa, climate change and socio-economic conditions are already a cause for worry — is about to get worse as the global price of fertiliser soars.
Economists from the World Bank have warned that high fertiliser prices could exert inflationary pressures on food prices, compounding food security concerns at a time when the Covid-19 pandemic and drought induced by climate change are making access to food more difficult.
According to the World Bank's latest Commodity Markets Outlook released on Monday, skyrocketing fertiliser prices “will see more rationing, as farmers are forced to use less because it’s too expensive”, potentially disrupting food production and supply, especially for staples like maize. Prices are being driven by surging energy costs, supply restrictions and trade policies.
Higher natural gas prices in Europe also resulted in widespread production cutbacks in ammonia — an important input for nitrogen fertilisers — while escalating thermal coal prices in China led to a rationing of electricity use in some provinces forcing fertiliser factories to cut production.
This is happening at a time when China and Russia, the world’s biggest fertiliser producers, are restricting exports to shore up domestic supplies.
China announced suspension of fertiliser exports until June 2022 to ensure domestic availability. Its DAP exports account for approximately one-third of global trade. Russia too recently announced restrictions on nitrogen and phosphate fertiliser exports for six months, effective December 1, 2021.
Fertiliser prices increased sharply in the third quarter of 2021 and continued rising in early November, reaching levels unseen since the 2008-2009 global financial crisis, the World Bank said.
Globally according to the analysis, the price of DAP (diammonium phosphate), the world's most widely used phosphorus fertiliser, has steadily gone up from a monthly average of $603.1 per metric tonne in August to $643.8 in September and $672.9 in October. The price of TSP (triple superphosphate) jumped from $555 per metric tonne in August to $573.8 in September and $618 in October.
A spot check of prices in Kenya this week showed that a 50kg bag of fertiliser now costs between Ksh4,000 ($35.67) and Ksh5,000 ($44.58) up from Ksh3,000 ($26.75) to Ksh3,800 ($33.88) in May.
In Rwanda, the DAP 50kg bag of fertiliser retails for Rwf31,650 ($31.04) from Rwf30,750 ($30.16) three months ago. The price of a 50kg bag of urea fertiliser increased from Rwf22,500 ($22.07) to Rwf28,000 ($27.46) in the same period while NPK fertiliser prices increased from Rwf32,500 ($31.87) to Rwf35,900 ($35.21) per 50kg.
Fertiliser companies — including Norwegian company Yara and BASF and Borealis — have announced reductions.
However, DAP prices are projected to remain elevated in the first half of 2022 on expectations of tight supply. Fertiliser production in the region has dropped as much as 40 percent.
