- [Narrator] Fertilizer prices have hit record highs,
driven by supply shortages caused by the Ukraine-Russia war,
along with a host of preexisting factors.
- It's a challenge for all of US agriculture right now.
For farmers who are just walking in to buy fertilizer today,
they're twice as extensive
as they would have been last August,
close to three times as costly as they would have been
in early 2021.
- [Narrator] Fertilizer is typically
among farmers' biggest expenses each year.
And the rising costs are creating cascading impacts
for farmer incomes, crop yields, and food prices.
- Broadly speaking, that is a big concern
for food production and if others parts of the world
can't get their fertilizer in,
then it becomes what some CEOs have warned
as a global food crisis.
- [Narrator] So what's driving
these surging fertilizer prices?
And what does that mean for farmers and your grocery bills?
Like many products and services during the pandemic,
fertilizer prices have been impacted
by global supply chain challenges.
- There's a lot of elements
that go into manufacturing fertilizer
and how it's produced.
It requires different ingredients
and natural gas from all different parts of the world.
If one of those things is disrupted,
it throws off the entire supply chain
for how fertilizer is produced.
- [Narrator] There are several key factors
behind the global fertilizer supply crunch
driving high prices.
First, various trade restrictions in 2020
led to a steep drop off in fertilizer exports.
In December, the US and European Union
imposed sanctions on Belarus.
This halted exports of potash,
a key ingredient in mineral fertilizers.
Belarus is the world's third-largest potash provider.
Meanwhile, trade restrictions from China,
Turkey, Egypt and Russia led
to reduced fertilizer exports
in the second half to 2021.
- Chain banned phosphate exports in 2021.
When a country like China cuts off its experts,
that sends prices all over the world up.
- [Narrator] In February, economic fallout
from Russia's invasions of Ukraine
further compounded the strain on fertilizer production.
Russia is the world's largest fertilizer exporter,
providing around 15%
of the world's nitrogen-based fertilizers
and 17% of the global potash supply.
The West's financial sanctions against Moscow,
combined with transportation challenges linked
to the war led to a sharp decline in Russian exports.
- If you are gonna export out of Russia,
the insurance on vessels is very expensive.
That keeps people from getting fertilizers out.
- [Narrator] At the same time, rising natural gas prices
have prompted some European factories
to scale back fertilizer production.
Natural gas is another major Russian export
and a key ingredient in making nitrogen-based fertilizer.
Fertilizer is about three to four times costlier now
than in 2020,
and farmers around the world are feeling the pinch.
- High fertilizer prices has affected really the flow
of how our operation does business,
and really, it comes down to timing
and how much risk does the retailer take?
How much risk does the farmer take?
(truck rumbling)
- [Narrator] Grant Wells is a third-generation corn
and soybean farmer in Fonda, Iowa.
He's also the CEO and owner of Wells AG Supply,
an agriculture retail business.
- When the Russian war hit
and in February is really when things started going wild,
is when things started doubling, tripling
and so it's really gonna affect
what the decision making
and what farmers' profitability's gonna be in 2023.
- [Narrator] Higher fertilizer prices translate
into higher production costs for farmers
who already operate on tight profit margins.
It's also leading to delays in farmers' planting schedule,
which could create supply chain snags
as crops are harvested later in the season.
- Most farmers I see delaying that decision making process
to later in the season,
instead of maybe November, December,
they're probably gonna sit on their hands
and wait 'til Jan, Feb, March,
hoping for some sort of a price reduction,
and if that doesn't happen,
then they'll choose to decide how much can get cut back?
- [Narrator] Applying less fertilizer could also lead
to lower crop yields.
While some US farmers plant to cut back
on their overall fertilizer use,
others are shifting their acres
toward less fertilizer-intensive crops.
Soybeans, for instance,
don't require as much nitrogen-based fertilizer.
- So it's usually a battle in Iowa
or in the Midwest between corn and soybeans
and so farmers will look at alternatives to corn.
Corn is a lot more dominating on the fertility needs.
- [Narrator] According to the US Department of Agriculture,
the net income for farmers reached around $119 billion
in fiscal year 2021,
the highest in eight years.
But higher fertilizer prices and other rising costs,
such as herbicides are squeezing their profit margins.
That means grocery bills could go up even more in 2022,
following a year in which global food prices rose
to decade highs.
- It appears that food costs are high
and farmers are benefiting but that is not the case.
Profit margins are the same,
consumers are just unfortunately having to pay more
to put food on their own table.
- [Narrator] Higher corn and soybean prices,
for example, raise the cost
of animal feed for meat companies,
which pass along the increase to consumers.
- And I think the worst case scenario
is that we don't have fertilizer at all
to apply to the crops and then that becomes a feed
and food production issue.
If we don't produce the crops,
we can't probably produce the livestock and the poultry
and we get into actual food challenges in the US.
And that would be a much, much greater concern
than what we have today.
- [Narrator] Meanwhile, some US farmers
are looking at commercial fertilizer alternatives.
Biologicals, for instance,
are natural fertilizers containing microorganisms
that enhance soil fertility.
- The high prices are forcing us
to look at alternative ways
to how we've applied fertilizer,
to be more precise
and to look at alternatives like what a biological can do.
- [Narrator] But switching to biologicals
or trying new techniques
may carry risks for farmers
who rely on consistent crop yields to make a profit.
- If they try something different one year
and their yields are down,
crop doesn't come in like they want,
then that's it for the year.
That is their income.
They need it to work.
They can't really take the risk.
- [Narrator] As fertilizer prices continue to rise,
the agricultural industry braces
for the long-term impacts on food productions.
- The solutions are very difficult to this
because it comes down to oil production,
natural gas supplies.
I think there's a very good chance
that fertilizer costs could continue to increase
and we could go into the 2023 crop year
with even higher fertilizer costs
than what we've had in 2022.
(dramatic music)