How a Fertilizer Shortage Could Drive Food Prices Even Higher

October 11, 2022 | 10:12 am
Omanjana Goswami
Interdisciplinary Scientist

In yet another year characterized by droughts, floods, wildfires, and record high temperatures, food and farming systems have been excessively stressed. Global food supply chains are further stretched from the COVID-19 pandemic and restrictions brought on by the war in Ukraine, which have disrupted the movement of grains and other agricultural products and resulted in shortages and massive price spikes. The Russian war in Ukraine has already pushed the world to the brink of a global humanitarian and food crisis, and now another crisis related to the war has unfolded.

In industrial agricultural systems, the holy trinity of nutrients—nitrogen, phosphorus, and potassium—is supplied in the form of synthetic fertilizers like urea and anhydrous ammonia (for nitrogen), potash (for potassium), and ammonium phosphates (for phosphorus). You might even be using some (or all) of these products in your lawn, backyard, or home garden. As my colleagues have written in the past, there are serious problems associated with the overuse of synthetic fertilizers, but in our current agriculture system, they remain absolutely essential for most farmers to grow food, maintain yields, and sustain livelihoods. And Russia plays a major role in fulfilling the world’s fertilizer demand.  

How does Russia control fertilizer production?

Production of nitrogen fertilizers requires ammonia, which is produced through a highly energy-intensive process called Haber-Bosch and fueled by natural gas. Russia is a major supplier of the gas used in the production of nitrogen fertilizers, and also produces about 21 percent of the world’s potash. Combined, Russia and its ally Belarus control more than a third of global potash exports. Russia also has a share in exporting other essential fertilizer products like ammonia (22 percent), urea (14 percent), and monoammonium phosphate (14 percent). Currently, a combination of war-related sanctions and domestic Russian policies have limited fertilizer exports from Russia, resulting in shortages along the fertilizer supply chain and pushing the world to the brink of another crisis.

Where do fertilizer prices stand now?

Fertilizer prices have increased dramatically in response to war-induced sanctions and export restrictions, and are likely to remain high through 2023 according to the US Department of Agriculture (USDA).

Data reported by the World Bank show that prices for two key fertilizers spiked dramatically between April 2021 and April 2022: diammonium phosphate prices went up 75 percent and potash prices rose a staggering 178 percent. The price of urea also surpassed its previous recorded spike in 2008 by approximately 18 percent. 

What fertilizer price increases mean for the United States

The United States is the among the world’s top five fertilizer importers, importing about 93 percent of the potash used here and smaller fractions of nitrogen (12 percent) and phosphate (9 percent). In an agricultural system that heavily relies on fertilizer inputs, escalating production costs mean farmers might have to adjust how much fertilizer they apply (farmers typically use fertilizer generously), or grow alternate crops that require less fertilizer. This year’s crops were largely grown using fertilizer purchased pre-war, and thus were not affected by the shortage. As the war continues to limit global fertilizer supplies, persistent high prices are expected to have a profound impact on farmers’ planting decisions and put future harvests at risk. Recent prediction data show that with the increase in cost of nitrogen fertilizers (which comprise approximately 59 percent of total fertilizer inputs in the US Corn Belt), the cost of growing food is set to increase by approximately 18 percent—the highest amount ever, pushing overall national production costs close to $300 billion. These increased costs are likely to reduce farmers’ profit margins, especially for small landowners who face significant challenges in an already inequitable farming system that disproportionately favors large-scale agriculture. Secondly, higher costs will be passed onto consumers, further stretching food budgets already stressed by recent inflation.

Where do we go from here?

Geopolitical considerations aside, our current agricultural model is not climate friendly, and the production and use of fertilizers contribute significantly to both carbon dioxide (CO2) and non-CO2 heat-trapping emissions. Here at the Union of Concerned Scientists (UCS), we have long advocated for farming systems to move toward resilient and regenerative practices that reduce reliance on synthetic fertilizers. With historic investments from the federal government pouring in to tackle the climate crisis, now is the time to move away from the fossil fuel dependency of our agricultural systems and adopt a model that benefits the environment and all those who depend on it. And Congress will have another opportunity to invest in a resilient and equitable farming future when it crafts a new federal farm bill in 2023. UCS and our partners are advocating for a transformational farm bill, one that enables farmers to fight climate change and become more resilient to extreme weather and other shocks, while simultaneously addressing food insecurity and unleashing the potential of agriculture to end global hunger and poverty.