Fertilizer prices reached record highs in spring 2022 on the back of returning demand after the Covid-19 pandemic and tensions in the Black Sea region. This article reflects on the events of the last two years and analyzes why global food production remained high irrespective of the surging fertilizer prices.

Despite initial concerns, fertilizer supplies were impacted by the crisis only to a certain extent. When the Ukraine war started, Western countries applied trade sanctions on the Russian Federation and extended sanctions on Belarus. This created nervousness among market participants in view of the significant share of these countries for world fertilizer supply. However, fertilizers were eventually exempted from most of those restrictions and exports from these origins reached international markets through pre-existing or new logistical routes.

Another concern was rising production costs for European manufacturers, who faced escalating prices of natural gas, the main feedstock for most nitrogen fertilizers. While European fertilizer production did indeed take a hit, global nutrient supply was largely ensured by fertilizer production elsewhere. In addition, several governments supported domestic availability by limiting exports of locally produced fertilizers.

Looking at trade flows, not all countries were impacted by the crisis in the same way; several major food producing countries were also not the most exposed to availability constraints. China and the United States, for example, could rely on local production for much of their nitrogen and phosphate demand; Brazil and India continued importing fertilizers from the Russian Federation, often benefitting from two-tier pricing as products diverted from other destinations were looking for a home; and the European Union allowed more imports from far-away origins to make up for lost domestic supply.

The timing of trade requirements was also important. At the peak of the crisis in spring 2022, countries in the Northern hemisphere had mostly completed their fertilizer purchases. Since then, import demand has been rather sluggish, with countries shifting to just-in-time purchases to benefit from decreasing prices.

Finally, reduced global fertilizer demand as a result of the high prices did not translate into reduced global harvests. This can be attributed to several factors. For one, the price elasticity of demand varies across nutrients. Unlike for nitrogen, applications can be punctually skipped for phosphate and potash without major yield changes. Thus, although global uses of those two macronutrients did decrease over the last two years, negative effect on yields might have been limited.

In addition, some crops including soybean are nitrogen-fixing, meaning that they require comparatively low nitrogen doses and could fare better throughout the crisis. For crops that require stronger applications, the higher fertilizer prices were frequently buffered by higher selling prices of those crops for countries connected to world markets. What is more, application rates in several grain exporting countries are alrady relatively high, so lower application rates may have actually improved efficiency rates.

To summarize, the recent hike of fertilizer prices was undeniably a great source of concern for food security. While causing challenges at local scale the price hike nevertheless did not significantly impact outputs in major food producing countries. Going forward, the crisis highlighted the importance of a better assessment of fertilizer markets in a context of raising uncertainties on global trade. With the support of the G20, AMIS is building reliable information systems comprising up-to-date global supply and demand analysis, as well as comprehensive understanding of policies impacting fertilizers. Further efforts are required to collectively understand the complex impacts of changing fertilizer trends on food production in specific geographies.