The fertiliser shortage is already affecting the world and the rise in fertiliser prices is expected to lead to a drop in fertiliser supplies, with some sources predicting that we could see a global drop in crop yields next year.
India is an agricultural country that depends on fertilisers to feed its citizens. Agriculture production is directly controlled and restrained by the supply of urea with fertilisers. Urea is typically produced with ammonia extracted from coal and natural gas. With coal and natural gas prices rising, the price of urea has skyrocketed. On Oct. 15, China mandated inspections for exports of 29 categories of fertiliser-related products, including urea. China, one of the world's largest producers of urea, is catering domestic market to meet its demand. When the world has already been jeopardised by the Covid-19 health crisis, supply chain constraints, chip shortages skyrocketing of Urea price has a direct effect on agriculture production and will create a food crisis soon globally.
Data from the global energy, agriculture, and weather said per ton of Urea, which was US$358 per ton in October 2020, has reached US$751 during the last week of October. Potassium was sold for US$731 per ton during the last week of October, up 12.9% from US$647 a month earlier and 2.5 times higher than the US$332 average price recorded a year before. Potassium and Diammonium phosphate (DAP) price has also increased as of the last week of October. DAP sold for US$812 per ton, which was almost double the US$448 price a year earlier.
The fertiliser shortage is already affecting the world; around 30% of coffee farmers in Brazil have not received the fertiliser they have ordered, while urea imports to Peru have been delayed by up to three months. Thailand, a major exporter of grain, has been ruckled with the president of the Thai Agriculturist Association, saying that "a ton of fertiliser is now more expensive than a ton of rice." Last Friday, the Food and Agriculture Organization of the UN (FAO) announced a Food Price Index score of 133.2 points, up by 3% from the month before.
According to the Food and Agriculture Organization of the UN, major urea producers as of 2019 was India (24.46 million tons), Russia (8.63 million), Indonesia (7.72 million), Pakistan (6.17 million), and the US (6.13 million) China data was not available. Most urea exports in 2019 came from Russia (6.98 million tons), followed by Qatar (5.13 million), China (4.94 million), Egypt (4.41 million), and Saudi Arabia (3.17 million). Together, those five countries accounted for 56.5% of global urea exports that year. China is the world's biggest producer and exporter of urea, supplying around 5 million tons to the global market each year. At 47.5%, India accounted for nearly half of Chinese exports of urea between January and September 2021, and South Korea accounted for another 14%.
Indian Case: India had contracted urea imports at around $290 per tonne CFR (cost plus freight). Those prices are now at $510-515 per tone and more. Import prices have similarly surged over the last year for diammonium phosphate (from $330 to $630 per tonne) and intermediates such as phosphoric acid (from $625 to $998), ammonia ($205 to $670), and sulphur ($75 to $210). Phosphoric acid price for the July-September 2021 quarter to $1,160 per tonne CFR, which Indian DAP manufacturers are saying is unviable for them. Muriate of potash (MOP), where imports into India were coming at $230 per tonne a year ago, Belarus India's second-largest MOP supplier in 2020-21 renegotiated and fresh imports contracted at $400 levels. China has been India's biggest supplier of urea, and No. 2 for diammonium phosphate and had summoned fertiliser firms for a discussion against speculation and hoarding of nutrients, following which they decided to suspend exports and assure supplies in the domestic market temporarily.
Finally, as US fertiliser company CF Industries Holdings Inc. said, global demand for fertiliser would continue at least through 2023. There will be a severe supply demand contraction. The rise in fertiliser prices is expected to lead to a drop in fertiliser supplies, with some sources predicting that we could see a global drop in crop yields next year. A device of effective measures is needed to tackle the crisis at a high level. When India already depends on Oil Bills, computers, Industrial, Manufacturing Engineering and hardware, Cooking Oils, now it has to tackle fertilisers and allied, as they are the nation's backbone and they are directly related to food production? India, like other nations, completely depends on the world supply chain. Disturbances there cannot be stopped, but can be restrained. Do alternative arrangements have to be done on war footing to foresee any damage to the economy as we are in an interconnected and interlinked world? For now, the world food crisis is just beginning; precaution is a must?
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