Fertilizer prices have increased due to a multitude of factors and now even more uncertainty is present in the market with sanctions hitting Russia left and right.
This week, we dug into the US fertilizer situation for nitrogen (N), phosphate (P), and potash (K). The US Geological Survey (USGS) provides a summary on mineral commodities, which has excellent details and can be found here.
The US relies heavily on potash imports but much less so for nitrogen (ammonia) and phosphate. The world’s largest producer of potash happens to be our neighbor to the north. In 2021, the US imported 93% of its potash needs with imports around 7 MMT and Canada accounting for 5.25 MMT of that total. Russia and Belarus made up another 1.3 MMT and even though the US has sanctions on Belarus (that began in August), imports still trickled in. However, this was a big jump in imports, year over year. Perhaps buyers hedged bets and brought in extra tonnage to get through the start of 2022. Plus, another US mine should be in production in 2022 with capacity at 650,000 tonnes per year.
But in the midst of the war, Russia and Belarus found themselves alienated from world markets and that likely will have widespread impacts on fertilizer trade. While Russian fertilizer is not directly being sanctioned, Russia has announced intentions to ban fertilizer exports with restrictions already in place for nitrogen-containing fertilizers. Assuming the US would not import any potash from Russia and Belarus, then an extra 1 MMT to 2 MMT of potash would need to be sourced to keep application rates the same. For nitrogen and phosphorus, the US produces significant volumes of both, relying less so on imports and nearly none being sourced from Russia or Belarus.
In 2021, the US imported 2.2 MMT of nitrogen or 12% of actual consumption needs. The top suppliers of US nitrogen imports were Trinidad and Tobago at 63% and Canada at 34%. But, 35 plants across the US produced 14 MMT of nitrogen, which represented about 84% of capacity. And of that 14 MMT, 88% of that was used for fertilizer. No capacity increases have been announced for the US in 2022, but we could see more utilization of current capacity. China is the world’s largest producer of nitrogen followed by Russia and the US. Hence, Russia’s banning of nitrogen-based fertilizer products has hit the world rather hard. India is another top producer of nitrogen.
LIke nitrogen, the US produces much more phosphate rock than it imports. Of the 22 MMT the US produced in 2021, more than 95% went to ammonium phosphate fertilizers and animal feed supplements. The US imported about 13% of its consumption needs in 2021 with 87% of that coming from Peru. DAP production decreased in 2021 thanks to Hurricane Ida, which damaged facilities in Louisiana. China, Morocco, and the US are the top producers of phosphate rock.
USDA has data on historical fertilizer application rates. Unfortunately, the latest data are through 2018 and no data are available for the 2007/08 year, when fertilizer prices sharply increased. But, applying 2018’s application rates to acreage totals from 2018 forward, we get the following outcomes, which underscores the need to import around 7 MMT of potash for 2022.
Per FBN’s January poll on fertilizer decisions, about two-thirds of US farmers planned to buy less or explore other options, such as manure, and the effect was more apparent in states that are less corn-centric. This was further underscored by USDA’s confirmation that corn acres are planned to be lower this year versus last. A further take away is that if the US producer altered plans, other countries could be as well.
While the US is in a rather secure position for most fertilizer supplies, Brazil is not. Brazil relies heavily on imports of all three fertilizer products with Russia a significant contributor. This has notable implications for 2022’s plantings in Brazil, which will start late this calendar year. Brazil has voiced its goal to increase fertilizer production, but it is unlikely that the country will be able to come anywhere close to meeting domestic needs within a year, much less a few months.
Nitrogen | Phosphate | Potash | |
Brazil | 95% Russia 21% China 20% | 75% Morocco 38% Russia 15% | 91% Canada 32% Russia 26% |
U.S. | 12% Trinidad 65% Canada 30% | 9% Peru 85% Morocco 15% | 93% Canada 83% Russia 6% |
Source: US: USGS Mineral Commodity Summary, Brazil: Farmdoc
Even though the US produces a lot of its fertilizer, the rising costs of energy along with global supply issues is keeping fertilizer prices at high levels. This has contributed to the pullback in corn acreage in the US and has farmers changing their fertilizer plans for the planting season. High prices could have further implications for fertilizer use in other countries, especially countries that rely heavily on Russia and China for their needs.
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