The ever-increasing costs of fertilizer have burdened many farmers and other growers. Studies show that global fertilizer prices are near the highest they have ever been. Additionally, expenses related to fertilizers account for almost 20 percent of a typical farm’s cash outlays in the United States. Mike Straumietis, founder and CEO of Advanced Nutrients, notes that the price is even higher for producers of corn or wheat.
Fertilizer Market Size
The total global fertilizer production is estimated to be $185 billion by the end of 2022. In addition, the market size is forecasted to reach $223 billion in 2028, representing a CAGR (compound annual growth rate) of 3.1 percent during the review period.
One of the countries consuming the most fertilizer worldwide is the United States. Mike Straumietis states that it should not be surprising given that it is among the world’s largest producers of various crops, such as corn, soybean, and wheat.
In recent years, though, the U.S. has cut back on its nutrient use, with a significant percentage of farmers adopting the application of precision fertilizer. Nowadays, the country accounts for just 10 percent of global fertilizer use.
Factors Affecting the Increasing Costs
While the global market size for fertilizer is still increasing, the price of acquiring it is also rising. There are various reasons behind this trend, says Mike Straumietis.
One of them is that the raw materials used to produce traditional fertilizers are becoming harder to come by. Fertilizers are primarily made of nitrogen, phosphorus, and potassium. China and Russia are two of the main producers of these elements. With the current events surrounding those countries, the raw materials for fertilizers have become more expensive.
The pandemic has also disrupted global fertilizer production, hurting manufacturers and negatively impacting fertilizer plant turnarounds. Mike Straumietis states that health and safety measures at production facilities have contributed to backlogs, delayed maintenance, and decreased availability of workers.
Another thing of note is that the fertilizer industry is already prone to disruptions. A huge reason is that five countries or regions account for more than three-fifths of all fertilizer exports. These are Russia, Canada, the European Union, China, and Belarus. Any political or economic instability in these areas can lead to a worldwide shortage and cause a dramatic increase in fertilizer prices.
Impact of Rising Fertilizer Prices
An obvious effect of soaring fertilizer costs is a significant increase in global food prices. Mike Straumietis looks back on the 2008 global food crisis, with today’s trends seemingly playing out similarly to how they did more than a decade ago.
Fertilizer is a major expense stream for farmers. Important crops like corn, wheat, and rice heavily rely on traditional fertilizers. Farmers and producers may need to pass the cost to consumers if fertilizer prices continue to soar. As it stands, corn and wheat prices could increase by 15 to 20 percent and rice by 10 percent.
Currently, Mike Straumietis explains that producers have been able to mitigate the surge in fertilizer prices because most nutrients used for the planting season in 2022 have already been purchased the year prior. Unfortunately, they will start feeling the effect in a few months. Some farmers might have to adjust their acreage or modify their crop mix or other practices to compensate. Whatever their decision may be, it will likely affect their profit margin and production.
The global outlook for 2023 looks direr, as Russia’s war with Ukraine does not appear to be winding down anytime soon. The possible political conflict with China is also caused by its perceived U.S. aggression in the region. If fertilizer supply remains limited in the long run, Mike Straumietis notes that it will profoundly impact future planting decisions.
More on Mike Straumietis and Advanced Nutrients
Mike Straumietis is the founder and CEO of Advanced Nutrients, a company that has developed a broad spectrum of next-generation products that nourish each phase of a crop’s cycle from seed to senescence. The goal of Advanced Nutrients is to unlock the true genetic potential of plants, which is why growers from more than 110 countries have relied on its advanced fertilizer solutions.
