Fertilizer is so vital to Walter do Carmo Padua Jr.’s coffee trees that he can’t imagine producing any beans without it. That’s a problem because getting his hands on the stuff is now harder than any time in his 20 years of farming as the world faces record fertilizer prices in the latest threat to food security.
In Brazil’s Minas Gerais state, the coffee heart of the world’s biggest exporter, Padua is still waiting for deliveries on about half the fertilizer he paid for five months ago. After losing about 40% of his crop last year to drought, his farm was then hit by frost. Plants are extremely stressed, and he’s worried production this upcoming season will be even worse than the last if he doesn’t get the fertilizers he needs.
“That’s food for coffee,” Padua said. “Everything goes wrong even when applying fertilizers. Can you imagine if I don’t?”
The problems couldn’t have come at a worse time for agricultural supply chains. Global food prices have surged more than 30% in the past 12 months to reach a decade high as climate change ravages crops and the pandemic’s blow snarls production. Meanwhile, about a 10th of the world already doesn’t have enough to eat. The fertilizer crisis means major staple crops—corn, rice and wheat—are in further jeopardy, sending the Bloomberg Grains Spot Subindex up about 4% in the past month.
Blame the energy crunch.
Nitrogen-based fertilizers, the most important crop nutrients, are made through a process dependent on natural gas or coal. Those fuels are in extremely tight supply, forcing fertilizer plants in Europe to cut back on production or even, in some cases, close. Meanwhile, China has curbed exports to ensure enough domestic supply. That’s on top of elevated freight rates, increased tariffs and extreme weather, all of which have disrupted global shipments.
It's hard to overstate the importance of fertilizer to the food supply. Nearly every plate of food you touch has gotten there with the help of fertilizers. Even organic foods use animal manure and other nutrients. But it’s synthetic fertilizers that are widely credited for how the world gets fed.
Since we first started making synthetic fertilizers a little more than a century ago, the planet has gone from roughly 1.7 billion people to about 7.7 billion, largely thanks to enormous growth in crop yields. Some experts have even estimated the global population might be half of what it is today without nitrogen fertilizer.
With fertilizer markets now seeing unprecedented supply shocks and record prices, it means even more food inflation across the world.
Global commodity futures are already convulsing. Benchmark wheat prices have shot up to the highest since 2012, coffee is near multi-year highs and corn has also jumped.
Grains On The Move
Across Brazil, about a third of the nation’s coffee farmers don’t have enough fertilizer. In the U.S., some corn growers are seeing prices that are more than double what they paid last year. In Thailand, some rice farmers are calling on the government to intervene in the spiraling market.
And two of the world’s top fertilizer producers, Nutrien Ltd. and Mosaic Co., have said they expect the price surge will continue.