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PARIS: Due to the lack of basic fertilizers of which Russia is a major supplier, food prices could explode next year, as well as world hunger, producers and analysts of the fertilizer market warn. unison of the UN.

Synthetic fertilizers called NPK – based on nitrogen, phosphorus or potassium – have never been so expensive: international prices tripled between early 2021 and mid-2022.

“The difficulty of my job is predicting where they will be in the next 18 months,” admitted Joel Jackson, managing director and fertilizer market analyst at BMO Capital Markets, in July at an analyst conference in the United States.

In Europe, NPK fertilizers are at a “historical” level, as they are indexed to gas prices, which make up 90% of the production costs of nitrogen fertilizers such as ammonia and urea. However, natural gas continues to rise as Russia at war with Ukraine turns off the gas supply to the old continent.

Ammonia touched …

To maintain their profitability, several European fertilizer producers are ceasing production of ammonia, obtained by combining nitrogen from the air and hydrogen from natural gas. What hadn’t happened since the 2008 financial crisis.

At almost 300 euros per MWh of gas today, “compared to an average of 20 euros in the last 10 years”, “we have a big problem: it no longer works for all those who produce ammonia, because gas is 10 to 15 times more expensive than before “, explains to AFP Nicolas Broutin, boss of the French branch of the Norwegian producer Yara, European number one in nitrogen fertilizers.

Yara closed its factory in Ferrara, Italy for the second time this year in July. In the spring, the one in Le Havre in France had ceased production for three weeks. Since January, Yara has produced 15% less ammonia in Europe than last year, according to Deutsche Bank.

This week, as gas prices have risen again, the first Polish producer Azoty announced that it would suspend 90% of its ammonia production and the first Lithuanian producer Achema also announced the closure of its plant on 1 September.

“The risk of shortage if all of Europe comes to a halt is real, there could be a resource problem because we produce fertilizers in the winter in anticipation of spring 2023,” adds Broutin.

… and potassium

Farmers also risk running out of potassium due to sanctions against Russia, a major producer, and sanctions against Belarus, “responsible for one sixth of world potassium production,” recalls Joël Jackson.

Before the war, Russia was the world’s largest exporter of NPK fertilizers.

The UN boss recalled that Russian fertilizers and agricultural products are exempt from sanctions and should have free access to world markets “without obstacles”, at the risk of a global food crisis in 2023.

Brazil, an agricultural power of which Russia is the main supplier of fertilizers, “has already become aware of its dependence which will weigh on the agricultural campaign of 2023”, underline the experts of the Cyclope world guide of raw materials.

Producers fear an “artificial destruction of demand,” says Jackson: Farmers risk rationing or skipping some fertilizers that have become inaccessible. “You can already see it everywhere in Europe,” Broutin adds.

“It is in 2023-2024 that the increase in the prices of fertilizers and perhaps their lower use will be felt”, adds Cyclope, who foresees a “significantly reduced” agricultural production in Africa.

In the globalized world of fertilizers, these ailments, for the moment predominantly European, do business.

To do without Russian gas, European producers have been importing ammonia from North America or Australia since late 2021, according to Broutin.

Some see it as an advantage for organic fertilizers (manure etc.) or those produced from “green” hydrogen.

Meanwhile, the world’s number one fertilizer, Canadian Nutrien, will increase its potassium production to compensate for any Russian or Belarusian failures. Joël Jackson expects at least a doubling of Nutrien’s profits this year.

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