Grocery prices are on the rise as inflation grips the
nation.
The United States is already experiencing very high
inflation on food.
The United Nations worst case scenario calculation is
that food prices globally will rise by an additional
8.5% by 2027.
Part of those higher costs is due to more expensive
fertilizers. Prices of some fertilizers have increased
by 300% since 2020.
So last year it was around $270 per ton and now it's
over $1400 dollars per ton.
It's scary.
It turns my stomach a little bit to think about
the amount of risk that our family farm is taking right
now.
Energy prices go up, fertilizer prices go up,
food prices go up.
Farmers are being forced to pass those costs along to
customers.
We're going to see what action we can take to
increase fertilizer supplies globally.
We would only be able to feed about half of the
global population without fertilizer.
So it's essential.
It's necessary.
At the same time, creating enough fertilizer has a
tremendous cost on the environment.
As world demand for the most used synthetic fertilizers
has surged, stocks in the fertilizer space have
soared.
Grass sure seems to be greener for fertilizer
stocks and investors lately.
Here's why the world is faced with a fertilizer
crisis, both the shortage of it and its use.
Commercial synthetic fertilizers are commonly
used, but they're becoming way more expensive, and
farmers typically spend nearly 18% of their budget
on chemicals, fertilizers and seeds.
You know, if we can't sell our crop for what we've put
into it, obviously that would be very devastating.
And for most farms, you can't go more than one
season that way.
Last year we paid about $600 a ton for our fertilizer for
the fields. This year it's up to about $1000, so nearly
double.
Without fertilizer, crops may not get as much
nourishment as they need.
That can cause yields to dip.
You cannot grow industrialized crops without
fertilizer. You need seed, you need water, which is a
climate issue, and you need fertilizer to get the yields
that we in a developed country are used to to
support all our food needs.
The three main nutrients that plants need to get
through fertilizer are nitrogen, potassium and
phosphorus. There are certain crops that use much
less fertilizer than others: legumes, soybeans,
chickpeas, peas.
That entire category of food does not need to use
synthetic nitrogen for fertilizer.
They can eat the nitrogen that's in the air.
When the USDA surveyed farmers about what they
intended to plant in spring 2022, farmers responded with
plans to grow a lot less corn.
Instead, farmers expected to plant a record 91 million
acres of soybeans.
Fertilizer costs can also cause higher grocery prices.
Increases in fertilizer prices are going to mean
that corn at the store is more expensive.
I don't know the exact percentage, but fertilizer
prices definitely are a huge input cost for food.
The food price index increased 10.9% year over
year as of July 2022, and July marked the seventh
straight month that food at home rose by at least 1%.
And it's not just fruits and vegetables seeing
inflated prices.
It's the next layer of products after that, the
animals that eat all of those products.
So even though there are products that farmers can
grow that don't use the fertilizer, think about what
people want to eat, what they want to eat, you know?
Manufacturing nitrogen fertilizers uses the
Haber-Bosch process.
Takes nitrogen and combines it with hydrogen in a
chemical process that takes a lot of heat and energy.
And that heat and energy comes from primarily natural
gas.
The Haber-Bosch process was invented by German
scientists in the early 1900s, but chemical
fertilizer production began at a large scale after World
War II.
Henry used a new phosphate fertilizer developed by the
chemists.
The plant's manufacturing nitrogen for explosives
started producing that nitrogen for fertilizers
instead after the war.
Thereby increasing the yield of such staple crops as
potatoes, beans, tomatoes and corn.
Flash forward and the U.S.
still produces a significant amount of nitrogen and
phosphorus. Fertilizer firms have consolidated over
the last 25 years from 46 to 13.
In 2019, only four companies made up 75% of
both production and sale of nitrogen fertilizer in the
U.S.: CF Industries, Nutrien, Coke, and Yara USA
. And two, Nutrien and Mosaic, supply a lot of
potassium-based fertilizers, also called
potash, to North America.
The U.S. also imports a lot of potash, but many other
countries depend on Russia and Belarus for potash.
Together, they provided roughly 40% of the world's
potash exports.
For example, a country like Brazil gets 85% of its
fertilizer from Russia and Belarus.
Now they are running out of fertilizer.
Russia doesn't just export potash.
Russia and Ukraine together export 28% of fertilizers
made from nitrogen, phosphorus and potassium.
It's amazing how dependent the world is on fertilizers
from Russia and Ukraine.
Then Russia's exports were hit by sanctions following
its invasion of Ukraine.
That disrupted shipments, sending prices skyrocketing.
More fertilizer is finally on the way to the U.S.
from Russia and that couldn't be more important
amid fears of food shortages .
And natural gas costs have surged, ultimately raising
prices for fertilizers too.
So there's a direct relationship with what we're
seeing in fuel prices and fertilizer prices.
Will we actually be able to procure the inputs that we
need next year?
And part of that is supply chain coming out of the
pandemic, part of it is different parts of the world
where fertilizer comes from.
The scariest thing is availability.
Overusing fertilizers can contribute to nutrient
pollution, which the EPA says is one of America's
most widespread, costly and challenging environmental
problems. For example, overusing nitrogen and
phosphorus fertilizers can result in runoff reaching
waterways like streams and oceans causing algae blooms.
Those blooms can contaminate drinking water,
resulting in illnesses for humans and animals, and also
cause dead zones.
Then there's the soil itself.
Scientists are advocating for better soil management
that could reduce needs for fertilizer.
Cropped up yields with chemical fertilizers, which
works for a while but isn't as powerful as enriching the
soil with organic matter that will hold it in place
and enrich it in many different aspects, not just
the availability of the nutrients and fertilizer.
I'm not saying that the fertilizer is bad.
No, I mean, our soil naturally has nutrients, in
some places more than in others.
But if you are in a soil that is naturally depleted,
then you need to find a way to make those nutrients
available.
Then the farm is going to show me what passes for gold
these days. This is it, the fertilizer.
For example, Sri Lanka tried to push farmers to go all
organic, banning the use of fertilizers.
It should be this tall.
And now it's this tall.
Since the country has faced massive economic turmoil due
to a number of reasons and has ousted its leader, the
new acting president has promised to purchase
fertilizer for the next planting season amid fears
of food shortages.
So we really need to find the ways to make it possible
for farmers to make the move toward these
sustainable practices, practices that are not
perhaps as lucrative for them in the short term.
But long run, these practices will be great for
farmers. It will sustain their soil over decades.
But in the short term, it costs money to make the
change. So we need to compensate farmers for the
cost of making those changes to sustainable
practices.
The United Nations estimated fertilizers were responsible
for about 1 billion tons of carbon dioxide-equivalent
greenhouse gases in 2019, the latest data available.
That was equal to about 2% of total annual global
emissions that same year.
The way to help the American farmer is to make sure that
we have a place to sell our crop.
And we have such a huge role we could be playing on
really shifting the needle and reducing greenhouse gas
emissions.
Some entrepreneurs are working to make the fossil
fuel-intensive processes more sustainable.
Examples would be to use carbon capture to remove the
carbon from the air after it's been released in the
traditional process, or to power the Haber-Bosch
process with renewable energy, such as wind and
solar. There is a company called JOINN Bio which is
trying to engineer a microbe that would be able
to fixate nitrogen, bring the nitrogen in from the air
on cereal crops, so your wheat and your corn and your
rice, in the same way that legumes are able to, with
about half the amount of nitrogen fertilizer.
That would be a game changer for the industry.
The U.S. has announced a new global fertilizer challenge
to raise money to develop alternatives to fertilizers.
Let's aim to raise at least $100 million toward
increasing fertilizer efficiency and developing
alternatives by COP 27.
In March, the U.S.
also announced it would give farmers support to
combat the rising fertilizer costs, including
$250 million through a new USDA grant program to
support domestic sustainable fertilizer
production.
2023 is when the next farm bill will be passed.
And so this is a real opportunity to encourage
legislators to get language into the bill that will
encourage farmers to grow cover crops, to increase
soil carbon, to use intercropping and all the
practices that we know of, like no-till, that will
build the soil.
I'm hopeful. It's actually a very exciting time to be in
agriculture. It's a risky time.
I don't want to downplay that. And we're such a big
part of supply chain that we've seen empty grocery
shelves. You know, for the first time, our generation
has experienced that.
We feel like we can play a role in trying to mitigate
that from happening.
Ukraine just started exporting grains and other
agricultural products again.
However, until the Russia-Ukraine war ends, the
USDA said fertilizer prices will likely stay expensive.
But there really is no way around using fertilizer.
It's a matter of using fertilizer more efficiently,
using it more accurately at the right time and the right
quantities at the right place.