Down and Dirty: The Global Fertilizer Dilemma

Feeding the world is a big job and it requires something we seldom think about over lunch. Fertilizer. 

It takes over 3.7 billion metric tons of food per year to feed the eight billion people on the planet, and growing that food requires enormous quantities of fertilizer. It’s something nobody notices when things are running smoothly. But recently, a combination of the Covid pandemic and sanctions from the war in Ukraine have shown how dependent the world is on a few fertilizer producers. When those producers fail to supply, problems mount quickly - especially for countries that are already contending with hunger and food insecurity.

My name is Gabrielle Sierra, and this is Why It Matters. Today, we’re getting down and dirty with fertilizer. 

https://youtu.be/e6rDrw7rLDc?t=51 

WION: There is no effective solution to the food crisis without reintegrating Ukraine’s food production as well as the food and fertilizer produced by Russia and Belarus into world markets despite the war.

https://youtu.be/nFRvSQzEMd0?t=138 

United Nations: Global food insecurity has never been more urgent.

https://youtu.be/rmqFpXjOOFY?t=46 

Committee on World Food Security: What was a wave of hunger is now a tsunami of hunger.

Laura CROSS: If I were to summarize it in one sentence, I would say without the use of fertilizers, we would not be able to produce enough food to feed the population that we currently have in the world.

This is Laura Cross. She’s the Director of Market Intelligence at the International Fertilizer Association which represents the global fertilizer industry.

CROSS: Most people usually don't have fertilizer in the forefront of their mind when they think about the way the world works and how different factors come together. But actually fertilizer has a really significant impact on the food that is produced around the world and ultimately how many people our planet can sustain. 

SIERRA: What exactly is fertilizer? 

CROSS: The way that I would explain fertilizer to the everyday person who isn't involved in the agriculture market or isn't a farmer themselves, is that these are the crucial nutrients that are required to facilitate the growth of any given crop or plant. And we think about this in terms of three macronutrients, and these are nitrogen, phosphorus, and potassium. And these three nutrients are required to facilitate plant growth. It's very difficult to replace the level of yield growth that we've seen over the last 50 years or so with any sort of natural alternative. The way that the world has been able to grow and support a larger population is through intensive agriculture, and that has come as a result of fertilizer use. 

From 1950 to 2022, the world’s population ballooned from 2.5 billion people to 8 billion, and it continues to grow quickly every year. To accommodate that, global food production has to constantly grow as well. The most important foods in the equation are grains like rice, wheat, and maize, which supply half of the world’s calorie needs, and which require a lot of fertilizer to grow. 

In 2019, the U.S. used nearly 20 million metric tons of fertilizer to produce more than 420 million metric tons of grain. And since then, fertilizer prices have nearly doubled, hurting the pocket-books of farmers and leading to limited yields of fertilizer-intensive crops.

CROSS: And what has happened over the last 12 to 18 months has been a number of concurrent disruptions in the fertilizer sector. If we go back to COVID-19, starting off in 2020, really the first impact that we saw on the fertilizer market was something pretty similar to all commodities around the world, whether it was energy, whether it was consumer goods, anything that requires any sort of global trade of crossing borders. We saw an impact of the COVID-19 lockdowns on the ability to transport goods around the world. 

https://youtu.be/eLsV7CpFhFA?t=6 

Stansberry Research: COVID-19 has really been interrupting supply chains for major global manufacturers around the world.

https://youtu.be/ZXjx3D066p0?t=158 

PBS NewsHour: Electronics, autos, medical equipment, industrial machinery, pharmaceuticals...

CROSS: That in itself didn't last too long because fertilizers were quite quickly recognized as being essential goods. So they should be registered as being exempt from any restrictions on movement. However, something else that happened as a result of COVID-19 was a renewed emphasis on food security at the national level. So one of the first things that governments tend to do when there is the threat of either a shortage of food or potentially a shortage of inputs to their food production is they think about are there any ways that they can protect the domestic supply? We saw a few examples of this that impacted the fertilizer market where countries that were either producing and exporting fertilizer products were wanting to keep more of that domestically to be prioritized to the domestic population, or if they were importers of fertilizers, they tried to get ahead of any potential issues with sourcing products. So they actually were buying more potentially than they normally would do for fear of their not being enough. And what that does is that creates a bit of a domino effect where there is a really significant increase in interest and importance placed on the domestic supply of fertilizers.

These types of self-protective moves can further disrupt supply chains. For example in 2021, China, the world’s second-largest producer of fertilizer, curbed its fertilizer exports. This led to global disruptions that are still being felt today.

So, why haven’t you heard all about this on the news? One reason fertilizer supply shocks tend to go under the radar is that their effects don’t materialize instantly. It can take months, or even a year before the effect on food security becomes clear.

CROSS: Then if we look more recently to the war in Ukraine, one of the biggest issues that we've seen is the impact of sanctions on some fertilizer producers or on the owners of fertilizer producing companies. 

https://youtu.be/aX_-zUOgs6I?t=46

France 24 English: As sanctions continue to mount against Russia, exports have ground to a halt. The price of natural gas, a key ingredient in fertilizer, has also skyrocketed.

https://youtu.be/8KI4A9UECSA?t=141 

Wall Street Journal: The West’s financial sanctions against Moscow, combined with transportation challenges linked to the war, led to a sharp decline in Russian exports.

https://youtu.be/8KI4A9UECSA?t=150 

Wall Street Journal: If you are gonna export out of Russia, the insurance on vessels is very expensive. That keeps people from getting fertilizers out.

CROSS: This was an unprecedented challenge when it came to the supply of both food, particularly grains products because Ukraine is such a major supplier of global grains and then also of the fertilizers, and that's because of the role of the Russian producers. Russia supplies around a quarter of all of the global fertilizers that are traded. Now what that has done is that has actually hit the availability of fertilizers, and that has meant that some producers around the world have not been able to supply their usual customers either because of an explicit sanctions risk because some companies such as the national potash producer in Belarus for example, is listed as a sanctioned entity. And it's very difficult for international buyers to then source their product from them or because of what we call indirect risks as a result of broader sanctions on a country such as Russia, which is what we've seen as a result of the war in Ukraine. 

Sanctions are penalties. They are created to compel an actor, in this case Russia, to change its behavior. But some sanctions, especially on exports, can have blowback results. 

For example, farmers in Eastern Canada paid an additional $34 million for nitrogen-based fertilizer in 2022 after sanctions were applied to Russian imports.

Overall, Russia’s invasion was a double whammy for global food security. Ukraine, long known as the breadbasket of Europe, was having trouble shipping its grain, while Western sanctions meant that Russia could no longer easily export its fertilizer.  

CROSS: So there's been a lot of confusion and bottlenecks to try and get through in order to get that product into the global market. And so that had a really significant impact above and beyond those issues that we already had as a result of COVID-19 and weather issues that had come before that.

Okay, let’s run through a fertilizer path real quick. 

We start in Russia because they are a leading producer of nitrogen fertilizer. That fertilizer is then shipped to Brazil, an agricultural giant that imports almost all of its nitrogen fertilizer from Russia. Farmers then use that fertilizer to grow soybeans, of which Brazil is the largest exporter in the world. And their top buyer is China. So in the end, people in China are making tofu from soybeans that started out as ammonia in Russia.

And that’s just one of the many, many fertilizer-dependent supply chains that keep the world fed. And as we know, when it comes to supply chains, the more links in the chain, the more opportunities there are for something to go wrong.

SIERRA: What countries produce the most fertilizer?

CROSS: When we look at nitrogen, the biggest producers by far are China and India. And a lot of this is because of the government focus on providing farmers with the inputs they need to grow enough food. We also have significant production in Russia. That's because of the natural gas resources that they have there and also the U.S. is now in the top four producers of nitrogen. So it's a very big player when it comes to global production. Then when we look at the phosphate market, China again is a very significant producer. That's partly because of the phosphate rock reserves that they have within the country, and that's followed closely by Morocco, which has a very significant portion of phosphate rock resources as well as the U.S. and Russia, which are significant producers as well. And then when it comes to potash, this is where things do get quite interesting. If we think about the geopolitical dynamics of the last 12 to 18 months, the largest producers of potash are Canada, which in itself hasn't had any huge geopolitical issues that have impacted the fertilizer market, but it's followed by Russia and Belarus and both of these countries combined in a pre-sanction era, they were accounting for about 40% of all of the potash fertilizers that were traded globally. And since the first sanctions that were implemented on Belarus, we've actually seen almost all of that production be impacted in one way or another. So that's where we have somewhat of an anomaly in the potash market that two of the world's largest producers have been impacted by sanctions in the last couple of years.

SIERRA: Are all three fertilizer options needed or could the world get by with just one if it had to?

CROSS: Yeah, the short answer is that yes, all three are needed. They're needed in different amounts, and the in-season impact as a result of not applying one is different. So for nitrogen, you see a much more immediate impact on yield by not applying it. However, if you were to forget about your phosphate or your potash fertilizers for an extended period of time, there will be a yield impact as a result of that. And this also depends on the local soil conditions and soil types. So there are parts of the world that have naturally more alkaline soils. There are those that have better drainage just as a function of the climate and the geology of these countries.

This is why geological luck of the draw is an important factor in the world of fertilizer. Whether or not you happen to have potash in your borders will say a lot about how much you need to import, as will the makeup of your soil, water levels, etcetera, etcetera. But once you have the materials you need, the creation process can begin. 

CROSS: So if we look at those macronutrients, if we start with nitrogen, and the reason we tend to start with nitrogen is because this is the fundamental nutrient that is required. Almost every crop that you can grow with the exception of some nitrogen fixing plants requires nitrogen application. And without that, you will get either a very, very limited yield or a yield that is not sustainable. I always go back to sort of high school chemistry lessons when I think about this, that the composition of the air around us is primarily nitrogen. It's 78% of the content of the air around us. However, in that form, it's not much use to us. And so the way that nitrogen fertilizers are produced is we go through something that's called the Haber-Bosch process. And this is a chemical process that was invented in the early 1900s. And what it does is it converts the nitrogen in the air into a solid form through a chemical process. Now that chemical process requires a significant amount of energy, and at the moment, the majority of the nitrogen fertilizers that are produced around the world are done so through the use of natural gas or through coal in China. And you need access to the air, which everybody has, but not everybody has the access to do that with a cost-effective energy source. And then if we go to phosphates and potash, which are the fertilizer forms of those two other macronutrients, phosphorus, and potassium, these two products are mineral resources. So they're found in deposits deep underground. So they require mining activity to extract them in the same way that we have for gold or iron ore, other metals that are commonly mined around the world. This then becomes a question of geology. So where around the world can you find these deposits? That's really a question of where they originate, and it's really luck of the draw whether a country has access to these resources or not. Most of the cost here is the processing of those mineral ores that are extracted from the ground. 

So, if you’re a country, and you want to produce your own fertilizer, you’re going to either need to have cheap energy, lots of money, or the right mineral deposits within your borders. If you don’t have any of these, then you’re going to need to import fertilizer, or even grain itself.

SIERRA: Who would a fertilizer shortage affect most?

CROSS: We've definitely seen an impact of fertilizer shortages, but also fertilizer availability in some of the more vulnerable importing markets like Sub-Saharan Africa, like some of the smaller Latin American countries and also South Asia as well. And this is a function of these countries importing their fertilizer needs, but also due to a lot of the farms in these countries being small holder or subsistence farms. So they don't have that same business minded approach to farming that maybe a farmer in Western Europe or the U.S. might have, where they're really clearly thinking about the costs and the profits that they can expect each season. When you look at the definition of food insecurity, this isn't just about a question of hunger and starvation, which is really at the extreme of food insecurity, but it's also about access to a nutritious and balanced diet at a cost which is feasible for the population. And that's something that has definitely been a struggle over the last 12 months because of food price inflation and it's also having a stable supply of that food as well. And that's where we see certain parts of the world, especially where the agriculture is made up of subsistence and small holder farmers, the supply chain just is not as resilient as we see it in other countries. So that's where we've seen a really big increase in the threat of food insecurity and comes from lots of these overlapping factors, not just fertilizers, not just food supply. It's a result of many different interlinking drivers.

More than one-third of the world’s undernourished people live in Africa - that’s over 270 million people who experience hunger. And while Africa is a continent with some of the richest farming land on earth, its agricultural systems contend with a lot of dysfunction, which in many cases forces countries to import food and fertilizer from the outside.

SIERRA: I know it's a big continent and it cannot and should not be generalized, but when it comes to food insecurity and Africa, historically, what should we know?

Michelle GAVIN: Well, historically, food security has been a real problem on the continent, and you're absolutely right. It varies from place to place. But Africa is the region of the world most dependent on food imports. 

This is Michelle Gavin. She’s a senior fellow for Africa Policy Studies at the Council.

SIERRA: Are any countries currently facing a food shortage directly tied to the war in Ukraine? What has the economic impact been?

GAVIN: Well, it's been substantial. Just as, you know, a lot of Americans have noticed rising food prices, so too, have Africans been coping with rising food prices. It's hard to disaggregate the different trends that are affecting food security on the continent right now because you have historic drought in some parts of the continent, you have some pretty epic flooding in other parts. You've got insecurity, which absolutely affects the capacity of farmers to plant and harvest on time. So there are lots of different factors that have contributed to a pretty dire food security situation right now, where the former head of the WFP was stressing to international audiences just a few months ago...

https://youtu.be/rmqFpXjOOFY?t=61 

Committee on World Food Security: 50 million people in 45 countries are now knocking on the door of famine. And risk being tipped over the edge, without immediate and substantial humanitarian support.

GAVIN: So the situation's quite dire. Yes, Russia's invasion of Ukraine has made it worse, but it's really hard to specifically say whose dire hunger crisis relates just to that. It's a mix of very difficult circumstances.

And this brings up one of the complexities about fertilizer’s role in the global food supply chain. It’s an essential part of the process, but it’s not the only part. Food also needs to be harvested, transported, and sold at a price people can actually afford. Weather plays a role, as does climate change. Corruption and political dysfunction can also be part of the story. When fertilizer shortages occur, they most heavily affect countries that are already in a fragile food situation due to a number of other problems. And this has certainly been the case in Africa. 

SIERRA: So this may be a silly question, but I tend to think of sub-Saharan Africa as a very fertile place. It wouldn't be my first guess for a place that needs to bring in food from the outside. What am I missing?

GAVIN: You're absolutely right. Again, Africa has, I think 60% of the world's unexploited arable land. There's plenty of agricultural potential on the continent, but the market incentives just haven't lined up in such a way that this is being maximized. So making sure that if you're going to exploit that land, that there's a way to get the crops to market in a way that isn't so expensive that they are not competitive within that marketplace. Then you add on the effects of climate change, and of course, then the global shocks that Africa and the rest of the world have experienced with the pandemic and now the war in Ukraine, and it's a challenging food security landscape.

SIERRA: So starting with that as the base already of the landscape, I've experienced the Ukraine invasion from an American perspective. How did it look from Africa? What were the major concerns?

GAVIN: I think the major concern really was about not wanting the world to become sort of bifurcated again into two camps. The African experience of the Cold War was not necessarily a positive one, and so more broadly at this geopolitical level, there was, and still is, a tremendous amount of African concern about being forced to choose sides. But then certainly the economic disruption from the war disruption of supply chains from Russia and Ukraine. But more broadly, the sense of economic dislocation, fuel prices going up. From an African perspective just looked like more bad news after the already very difficult experience of the pandemic. So economies that were already overstretched and households that were already at the brink of their coping capacity now have this new external shock to manage.

SIERRA: So what can be done? Is anything being done to strengthen the agriculture sector in Africa?

GAVIN: Sure. All kinds of government efforts on the continent, civil society efforts. Agricultural development is a sector with a long history and some wins and some disappointing results. You also have some really interesting ag tech innovations, particularly coming out of Kenya that are focused on kind of sustainable agricultural solutions and homegrown solutions that are actually really exciting and I think could become lessons learned for the rest of the world in how to be productive and feed ourselves in a way that isn't harmful to the climate. So there's a lot happening, but a long way to go.

SIERRA: What about not relying on global supply chains, do you think going forward we're going to see more African countries isolating their fertilizer production or food production?

GAVIN: I definitely think this sense of vulnerability to global supply chains was a big topic of discussion during the worst of the COVID pandemic, and now, around pharmaceuticals and now around food will be incentivizing a lot of African countries to boost their capacity to manufacture fertilizer and to address their food needs. The smart way to get this done will be to be thinking about food systems on the continent as a whole and not on a country-by-country basis. Africa with its incredible variety of agricultural climates and large number of states needs to work collaboratively rather than kind of individual country by country to really see the kind of results that policymakers and communities would like to see.

As long as the system remains as fragile as it is, many African nations will remain vulnerable to fertilizer shocks. But some are trying to shore up their own production. 

In March of 2022, Nigeria opened Africa’s largest fertilizer production facility, which has begun shipping fertilizer to the United States, Brazil, India, and Mexico. And Morocco, which is home to 70 percent of the world’s known phosphate reserves, has committed to upping its fertilizer production by more than 8 million tons over the next three years. 

But, at the end of the day, the economic incentives to produce fertilizer domestically are just not there - especially for smaller, low-income states in sub-Saharan Africa. 

SIERRA: Are other countries trying to fill in the fertilizer gap in supply that has been left there in Russia's absence?

CROSS: We have seen that countries are trying to fast track some of the investment plans that they had to bring online new fertilizer capacity to increase the production that they have. However, there is a limit to what can be done to increase the amount of supply. So especially for phosphates and potash, potash especially so because of that concentrated nature of where the ores are found around the world, that gap is very difficult. And I would say in the short term, it's impossible to fill the gap that we've seen as a result of those countries not being able to supply as much. So I think that something we've definitely seen in the last 12 to 18 months is lots of essential goods and products being caught in the crossfire of some of the geopolitical tensions that have taken place. For example, the U.S.-China trade war back in 2018, that had an impact on some of the exports of Chinese fertilizers. And for fertilizers especially, we really have to try and stress the importance of them being an essential good. These are products that should really not be caught up in any sort of trade conflict. And that's what we saw with the implementation of the Black Sea Grain Initiative last year, is fertilizers really being treated on the same sort of level as food products because the two really go hand in hand. And actually an issue that we might have with fertilizers today could lead us to a food issue 6 to 12 months down the line.

Signed by Russia and Ukraine in July of 2022, the Black Sea Grain Initiative guarantees the safe wartime export of critical grains from Ukrainian ports. However, in spite of the deal, ships are still being blocked or slowed by Russian forces, limiting the initiative’s effect. 

SIERRA: Could there ever be an alternative to the kinds of fertilizer we're using today?

CROSS: So there are definitely a number of products that are being developed or have been developed and are increasing in their consumption that allow for different types of fertilizers to be applied. However, they still do have that basic components of the three macronutrients. And that's something that as of right now, there really isn't an alternative to using these products if we want to be able to produce food on the same scale that we have it today. So there's a lot of innovation that's taking place. There's definitely some changes that are happening in terms of the regulatory environment as well with governments trying to maximize that efficiency of fertilizer use. But it is just a fundamental fact that plants will always need N, P and K or nitrogen, phosphorus, and potassium in order to grow.

So for now, synthetic production is the easiest way to get fertilizer. But there are other ways to farm. Afterall, in the centuries before synthetic production was possible, farmers used organic fertilizers, AKA manure, AKA...animal poop. So why not now? 

SIERRA: Have any countries stopped using inorganic fertilizers entirely?

CROSS: Yes. So we actually have a very recent example of this taking place, and that is the situation in Sri Lanka. And what we saw happen a couple of years ago as a directive from the Sri Lankan government was a ban on the use of inorganic fertilizers. And this was partly in order to try and make a shift to organic agriculture. However, it was not done with the sort of planning or preparation that would typically be required or advised to make this sort of transition. So as a result of a ban on the use of inorganic fertilizers, we actually then saw a real domino effect of many other issues happening in Sri Lanka. And this is something that has been in the news quite heavily.

https://youtu.be/53Vr0sCKEmw?t=14 

Farmers were pushed into abandoning chemical fertilizers overnight. The result was disastrous.

https://youtu.be/i_SR7G_7c_I?t=88 

The government of Sri Lanka banned the import of artificial fertilizer, pesticide, and uricide. 

CROSS: The lack of fertilizer being used in the country actually led to a collapse in the yield of many products, many crop products. And that in turn has led to a number of economic issues. And the country is really in a very difficult situation at the moment. And now we've seen that ban on inorganic fertilizers actually be reversed because the government quickly realized how much of an impact that was having on the food security of the country. So I would actually call that somewhat of a cautionary tale about what can happen if there is too fast of a shift away from inorganic fertilizers. And actually in reality probably is a combination of the two that is needed in order to move towards an organic agricultural setup.

It’s a humbling problem. For all the wild technological innovations the world has seen in recent years - plants still need these basic elements to grow, and the human race needs those plants in order to survive. And Sri Lanka’s example shows that it's not easy to return to organic fertilizer at scale.

In the meantime, the world must continue to rely on global supply chains that keep the food network going, even as we seek ways to improve the system. For some of us this issue will enter our lives in the form of climbing food prices, for others it will be a question of having enough food. It is worth thinking about for a second the next time you sit down for lunch.

For resources used in this episode and more information, visit CFR.org/whyitmatters and take a look at the show notes. If you ever have any questions or suggestions or just want to chat with us, email at [email protected] or you can hit us up on Twitter at @CFR_org.

Why It Matters is a production of the Council on Foreign Relations. The opinions expressed on the show are solely that of the guests, not of CFR, which takes no institutional positions on matters of policy.

The show is produced by Asher Ross and me, Gabrielle Sierra. Our sound designer is Markus Zakaria. Our associate podcast producer is Molly McAnany.

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For Why It Matters, this is Gabrielle Sierra signing off. See you soon!