Fertilizer Institute talks on US Domestic Production of Fertilizer
The pandemic has left a widespread impact on global agricultural industries, including fertilizer.
Harry Vroomen, Vice President of Economic Services at the Fertilizer Institute, says domestic production is currently limited by mandatory plant “turnaround” maintenance, which requires pipes and other parts to be replaced for safety.
“It could be up to 100 consultants running around to do these turnarounds. And of course, these were all delayed due to COVID as you don’t want all these contractors running around in your plants. So, what’s happened is that this year, a lot of these turnarounds couldn’t be delayed any longer. So not just in the us but globally. We saw many more turnarounds which had to be done, which impacted production.”
He says natural gas prices also accounts for 70-90% of ammonia production costs, which in turn influence the price farmers pay.
“Since the middle of last year, natural gas prices in the us have tripled. In Europe, which accounts for about 9% of global ammonia production. These prices are up six-fold. As a result, over 40% of domestic nitrogen capacity in Europe and the EU is actually shut down because they can’t operate at these higher rates.”
The US is the third largest user of fertilizer but only produces about 10 percent of total volume making us reliant on imports, but major exporters are currently limiting shipments.
“China has put curbs on exports of phosphate and urea as well as some other fertilizer materials. You see this is important because China accounts for 25% of global phosphate exports while those are limited that tightens the global supply. Same thing for urea…Russia again has also as of December 1 put quotas on their fertilizer exports.”
Fertilizer prices are also closely tied to crop prices. Looking ahead, Vroomen says they may stay high for another 2-3 years.
“That’s going to keep a lid on where fertilizer prices fall to. So that demand will keep increasing the supply disruptions will eventually you know come off particularly the export limits buy some of these countries, but again the demand will stay strong. So, fertilizer prices are high and they will come down at some point like prices always do. But they may not fall as quickly or as low as they did last time.”
While agriculture is the largest user of nitrogen fertilizer and products, industrial use also accounts for about 25%, further straining already limited supplies.
The EU and the US also currently have sanctions on fertilizer exports from Belarus, who exports 21% of total global supply.