This week, Texas A&M Agricultural and Food Policy Center (AFPC) released two reports on the on-farm economics of the current fertilizer market.
One report stated on a per-acre basis, farmers are seeing nitrogen costs increase $52.07 across the farms used in the AFPC modeling.
The second report, prepared for 21 state corn grower groups, cited the cost of natural gas for about 15% of the price increase over the past year.
That finding was in contrast to what some in the industry have felt has been an overstatement attributing high fertilizer product pricing to the sole increase in natural gas.
In a statement, Nutrien provided the following reaction:
“There are a number of factors driving global nitrogen pricing. While the market for nitrogen is global, and prices reflect that, the study seems to reference only natural gas prices in North America. The fact is that Europe has seen natural gas prices top $30 MBTU during 2021, causing several producers in Europe to actually close production for a number of weeks in the Autumn of 2021, thereby further diminishing supplies in the global market. In addition, weather related events such as Hurricane Ida earlier in the year closed production at several facilities in the southern US for several weeks, while China and Russia have both imposed curbs on exports that further diminish global supply. The study does not seem to address the surge in global demand for nitrogen throughout 2021 that has combined with these factors to have a negative impact on supply; the result being markedly higher prices.”
In reaction to the reports, The Fertilizer Institute provided this statement:
“Natural gas is an important cost factor in the production of fertilizer, particularly for nitrogen-based fertilizers, but it is by no means the only factor driving the current market conditions. Supply and demand determine the market price of a commodity, whether that commodity be corn, oil, gold or fertilizer. Due to issues that have affected nearly every industry and have been widely reported: such as extreme weather events, supply chain bottlenecks, and workforce issues; and issues specific to the fertilizer industry: such as global exporters banning or restricting exports and strong commodity prices. All of these factors, again, have led to increased pressure on the current market supply as producers in the U.S. work to ramp up production to meet both higher than expected demand and to make up for global production that has been taken off-line or severely curtailed.”
Jason Troendle, director of market intelligence and research at TFI, emphasizes the global scale and reach of the fertilizer market.
“Globally, 44% of fertilizers are exported. So even domestic production is exposed to the global market,” he said in an interview with The Scoop. “Whatever happens in Europe, for example, it’ll trickle here no matter what happens domestically. Comparatively, only 21% of global crops are exported.”
And he says the organization and its members empathize with the emotions around high prices, and that it’s important to keep an understanding of the global dynamics in perspective.
In its statement TFI explains, “While it is easy to look only at domestic supply and demand factors, 90% of fertilizer consumption occurs outside of our country so many global factors have ripple effects here domestically. Countries around the world are experiencing similar market impacts farmers are seeing here in the U.S.”
Specific to nitrogen, Troendle says in the 2020/2021 fertilizer year, domestic production totaled 14.6 million short tons, imports totaled 6.1 million short tons, and exports were 2.1 million short tons.
“30% of our nitrogen is imported, and we have healthy and robust production so we don’t have to go to the world market for a large portion of our needs,” he says.
In its statement, Nutrien cites its ongoing investment in production in North America:
“Fortunately, Nutrien is expanding its nitrogen production capability and enhancing the energy efficiency of its plants through a series of brownfield expansions. In 2021, we completed the first phase of expansions and initiated a second phase of projects that will be completed over the next few years. In total, the projects are expected to increase annual nitrogen production capability by approximately 1.5 million tonnes and reduce CO2 emissions by 1 million MT by 2023. This is not a business in which one can simply turn on the taps to produce more. There are very significant investments that have to be made over long periods of time to deliver substantial production capacity increases. Nutrien is the third largest global nitrogen producer and a leading global producer of low-carbon ammonia. We are working hard to ensure that farmers have the crop nutrients they need when they need them.”
CF Industries, Koch and Mosaic were asked for statements, but those have not been received yet.
